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 PETROLEUM AGREEMENT








AMONG


THE GOVERNMENT OF





THE REPUBLIC OF GHANA
































GHANA NATIONAL PETROLEUM


CORPORATION























AND


VITOL UPSTREAM GHANA LIMITER




















IN RESPECT OF








OFFSHORE CAPE THREE POINTS


SOUTH CONTRACT AREA


GHANA








2008


 TABLE OF CONTENTS





ARTICLE PAGE


1. DEFINITIONS 2


2. SCOPE OF THE AGREEMENT, INTERESTS


OF THE PARTIES AND CONTRACT AREA 8


3. EXPLORATION PERIOD 11


4. MINIMUM EXPLORATION PROGRAMME 13


5. RELINQUISHMENT 17


6. JOINT MANAGEMENT COMMITTEE 18


7. RIGHTS AND OBLIGATIONS OF CONTRACTOR


AND GNPC 22


8. COMMERCIALITY 25


9. SOLE RISK ACCOUNT 29


10. SHARING OF CRUDE OIL 32


11. MEASUREMENT AND PRICING OF CRUDE OIL 39





12. TAXATION AND OTHER IMPOSTS 41


13. FOREIGN EXCHANGE TRANSACTIONS 43


14. SPECIAL PROVISIONS FOR NATURAL GAS 45


15. DOMESTIC SUPPLY REQUIREMENT (CRUDE OIL) 51


16. INFORMATION AND REPORTS: CONFIDENTIALITY 52


17. INSPECTION, SAFETY AND ENVIRONMENTAL


PROTECTION 55


18. ACCOUNTING AND AUDITING 57


19. TITLE TO AND CONTROL OF GOODS AND EQUIPMENT 59


20. PURCHASING AND PROCUREMENT , , 61


^ J\








ii


Petroleum Agreement, MOE/GNPC/Vitol


ARTICLE PAGE


21. EMPLOYMENT AND TRAINING 62


22. FORCE MAJEURE 63


23. TERM AND TERMINATION 64


24. CONSULTATION, ARBITRATION AND


INDEPENDENT EXPERT 67


25. ASSIGNMENT 69


26. MISCELLANEOUS 70


27. NOTICE / \ 72

























































































Petroleum Agreement, MOE/GNPC/Vitol


 ANNEXES





ANNEX PAGE


1 1


CONTRACT AREA








ACCOUNTING GUIDE











SECTION 1


1.1 GENERAL PROVISIONS 3


1.2 STATEMENTS REQUIRED TO BE SUBMITTED BY 3


CONTRACTOR


1.3 LANGUAGE, MEASUREMENT AND UNITS OF ACCOUNTS 4


SECTION 2


6


2.0 CLASSIFICATION AND ALLOTMENT OF COSTS


AND EXPENDITURE


2.2 EXPLORATION EXPENDITURE 6


2.3 DEVELOPMENT EXPENDITURE 7


2.4 PRODUCTION EXPENDITURE 7





2.5 SERVICE COSTS 8


2.6 GENERAL AND ADMINISTRATIVE EXPENSES 8


SECTION 3





3.0 COSTS, EXPENSES, EXPENDITURES AND


CREDITS OF CONTRACTOR 9


3.2 COST OF ACQUIRING SURFACE RIGHTS


AND RELINQUISHMENT 9


3.3 LABOUR AND ASSOCIATED LABOUR COSTS 9


3.4 TRANSPORTATION COSTS 10


3.5 CHARGES FOR SERVICES 10


3.6 RENTALS, DUTIES AND OTHER ASSESSMENTS


11


3.7 INSURANCE AND LOSSES 11


3.8 LEGAL EXPENSES 11


3.9 TRAINING COSTS AND THE TECHNOLOGY


SUPPORT PAYMENT 11


3.10 GENERAL AND ADMINISTRATIVE EXPENSES 11


3.11 UTILITY COSTS 12


3.12 OFFICE FACILITY CHARGES 12


3.13 COMMUNICATION CHARGES 12


3.14 ECOLOGICAL AND ENVIRONMENTAL CHARGES 12


3.15 ABANDONMENT COST 12


3.16 OTHER COSTS 12


3.17 COSTS NOT ALLOWABLE UNDER THE AGREEMENT 12


3.18 ALLOWABLE AND DEDUCTIBILITY 13





3.19 CREDITS UNDER THE AGREEMENT 13


3.20 DUPLICATION OF CHARGES AND CREDITS 14








Petroleum Agreement, MOE/GNPCMol


ANNEX PAGE





SECTION 4


4.0 MATERIAL 15


4.1 VALUE OF MATERIAL CHARGED TO THE


ACCOUNTS UNDER THE AGREEMENT 15


4.2 VALUE OF MATERIAL PURCHASED FROM AFFILIATE 15


4.3 CLASSIFICATION OF MATERIALS 16


4.4 DISPOSAL OF MATERIALS 16


4.5 WARRANTY OF MATERIALS 16


4.6 CONTROLLABLE MATERIALS 16





SECTION 5


5.0 CASH CALL STATEMENT 17


SECTION 6 PRODUCTION STATEMENT 18


6.0





SECTION 7 VALUE OF PRODUCTION STATEMENT 19


7.0


SECTION 8 COST STATEMENT 20


8.0


SECTION 9 STATEMENT OF EXPENDITURES AND RECEIPTS 21


9.0


SECTION 10 FINAL END-OF-YEAR STATEMENT 22


10.0


SECTION 11 BUDGET STATEMENT 23


11.0





SECTION 12


12.0 LONG RANGE PLAN AND FORECAST > 24


12.2 CHANGES OF PLAN AND FORECAST / \ 25





























Petroleum Agreement, MOE/GNPCA/itol v


THIS PETROLEUM AGREEMENT, made this day of.......MAT.......................


2008 by and among the Government of the Republic of Ghana (hereinafter referred to as "The


State"), represented by the Minister for Energy (hereinafter referred to as the “Minister”), the


Ghana National Petroleum Corporation, a public corporation established by Provisional


National Defence Council Law 64 of 1983 (hereinafter referred to as “GNPC”), and Vitol


Upstream Ghana Limited, a wholly owned subsidiary of Vitol Holding B.V., with registered


address at No. 21, Aviation Road, P.O. Box 30414, KIA, Accra, Ghana and (hereinafter


referred to as "Contractor")


WITNESSETH:


1. All Petroleum existing in its natural state within Ghana is the property of the Republic


of Ghana and held in trust by the State.


2. GNPC has by virtue of the Petroleum Law the right to undertake Exploration,


Development and Production of Petroleum over all blocks declared by the Minister to


be open for Petroleum Operations.


3. GNPC is further authorised to enter into association by means of a Petroleum


Agreement with a contractor for the purpose of Exploration, Development and


Production of Petroleum.


4. The Contract Area that is the subject matter of this Petroleum Agreement has been


declared open for Petroleum Operations by the Minister and the Government of Ghana


desires to encourage and promote Exploration, Development and Production within


the said area. GNPC and the State have assured Contractor that all of said area is


within the jurisdiction of Ghana.


5. Contractor, having the financial ability, technical competence and professional skills


necessary for carrying out the Petroleum Operations herein described, desires to


associate with GNPC in the Exploration for, and Development and Production of, the


Petroleum resources of the said area.


6. The Parties recognise that Ghanaian nationals should as soon as reasonably possible


be engaged in employment at all levels in the Petroleum industry, including technical,


administrative and managerial positions, and that to achieve this objective an adequate


programme of training must be established as an integral part of this Agreement.





NOW THEREFORE, in consideration of the mutual covenants herein contained, itjs hereby


agreed and declared as follows:


 ARTICLE 1








DEFINITIONS


1. In this Agreement:


1.1 “Accounting Guide’’ means the accounting guide which is attached hereto as Annex 2


and made a part hereof;


1.2 “Additional Interest” means the additional interest of GNPC provided for in Article


2.5;


1.3 “Additional Interest Costs” has the meaning given to it in Article 2.9;


1.4 “Additional Interest Funding” has the meaning given to it in Article 2.10;





1.5 “Affiliate” means any person, whether a natural person, corporation, partnership,


unincorporated association or other entity:





a) in which one of the Parties hereto or one of the companies comprising Contractor


directly or indirectly hold more than fifty percent (50%) of the share capital or


voting rights;


b) which holds directly or indirectly more than fifty percent (50%) of the share





capital or voting rights in a Party hereto or one of the companies comprising


Contractor;





c) in which the share capital or voting rights are directly or indirectly and to an


extent more than fifty percent (50%) held by a company or companies holding


directly or indirectly more than fifty percent (50%) of the share capital or voting


rights in a Party hereto; or





d) which holds directly five percent (5%) or more of the share capital or voting


rigilts in Contractor.


1.6 “Agreement” means this Agreement between the State, GNPC and Contractor, and


includes the Annexes attached hereto and any agreed revisions thereto;


1.7 “Appraisal Programme” means a programme which may include extended well testing


carried out following a Discovery of Petroleum for the purpose of delineating the


accumulation or accumulations including extended well testing of Petroleum to which


that Discovery relates in terms of thickness and lateral extent and estimating the


quantity of recoverable Petroleum therein;


1.8 “Appraisal Well” means a well drilled for the purposes of an Appraisal Programme;


1.9 “Associated Gas” means Natural Gas produced from a well in association





Oil; <














2


Petroleum Agreement, MO&GNPC/Vitol


1.10 “Barrer means a quantity or unit of Crude Oil equal to forty-two (42) United States


gallons at a temperature of sixty (60) degrees Fahrenheit and at 14.65 psia pressure.


1.11 “Block" means an area of approximately 685 square kilometres as depicted on the


reference map prepared by the Minister in accordance with the provisions of the


1.12 Petroleum Law;


“Calendar Year" means the period of twelve (12) months of the Gregorian calendar,


commencing on January 1 and ending on the succeeding December 31;


1.13 “Carried Interest” means an interest held by GNPC in respect of which Contractor


pays for the conduct of Petroleum Operations without any entitlement to


1.14 reimbursement from GNPC;


“Commercial Discovery" means a Discovery which is determined to be commercial in


accordance with the provisions of this Agreement;


1.15 “Commercial Production Period” means in respect of each Development and


Production Area the period from the Date of Commencement of Commercial


Production until the termination of this Agreement or earlier relinquishment of such


1.16 Development and Production Area;





“Contract Area” means the area covered by this Agreement in which Contractor is


authorised to explore for, develop and produce Petroleum, which is described in


Annex 1 attached hereto and made a part of this Agreement, but excluding any


1.17 portions of such area in respect of which Contractor's rights hereunder are from time


to time relinquished or surrendered pursuant to this Agreement;


“Contractor" means Vitol Upstream Ghana Limited and its respective successors and


assignees.


1.18 “Contract Year” means a period of twelve (12) calendar months, commencing on the


Effective Date or any anniversary thereof;


1.19 “Crude Oil" means hydrocarbons which are liquid at 14.65 psia pressure and sixty


(60) degrees Fahrenheit and includes condensates and distillates obtained from


1.20 Natural Gas;


“Date of Commencement of Commercial Production" means, in respect of each


Development and Production Area, the date on which production of Petroleum under


1.21 a programme of regular production, lifting and sale commences;


“Date of Commercial Discovery" means the date referred to in Article 8.12;


1.22 “Deepwater" means water depths in excess of 400 metres:





1.23 “Development" or “Development Operations" means the preparation of a


Development Plan, the building and installation of facilities for Production, and


includes drilling of Development Wells, construction and installation of equipment,


pipelines, facilities, plants and systems, in and outside the Contract Area, which are


required for achieving Production, treatment, transport, storage and lifting of


Petroleum, and preliminary Production and testing activities carried out prior to the


Date of Commencement of Commercial Production, and includes all rek ‘














3


and administrative work, and may also include the construction and installation of


secondary and tertiary recovery systems;


1.24 “Development Costs” means Petroleum Costs incurred in Development Operations;


1.25 “Development and Production Are a” means that portion of the Contract Area


reasonably determined by Contractor (or by GNPC if a Sole Risk Operation pursuant


to Article 9) on the basis of the available seismic and well data to cover the areal


extent of an accumulation or accumulations of Petroleum constituting a Commercial


Discovery’, enlarged in area by ten percent (10%), such enlargement to extend


uniformly around the perimeter of such accumulation (or accumulations);


1.26 “Development Period” means in respect of each Development and Production Area,


the period from the Date of Commercial Discovery until the Date of Commencement


of Commercial Production;


1.27 “Development Plan” means the plan for development of a Commercial Discovery


prepared by Contractor in consultation with the Joint Management Committee and


approved by the Minister pursuant to Article 8;


1.28 “Development Well” means a well drilled in accordance with a Development Plan for


producing Petroleum, for pressure maintenance or for increasing the Production rate;


1.29 “Discovery” means finding during Exploration Operations an accumulation or


accumulations of Petroleum which, until that finding, was not a Discovery and which


can be, and is/are recovered at the surface in a flow measurable by conventional


petroleum industry testing methods;


1.30 “Discovery Area” means that portion of the Contract Area, reasonably determined by


Contractor (or by GNPC if there is a Sole Risk operation pursuant to Article 9) on the


basis of the available seismic and well data to cover the areal extent of the geological


structure in which a Discovery is made. A Discovery Area may be modified at any


time by Contractor (or by GNPC if applicable), if justified on the basis of new


information, but may not be modified after the date of completion of the Appraisal


Programme.


1.31 “Effective Date” shall have the meaning ascribed to it in Article 26.8;


1.32 “Exploration” or “Exploration Operations” means the search for Petroleum by


geological, geophysical and other methods and the drilling of Exploration Well(s) and


includes any activity in connection therewith or in preparation thereof and any relevant


processing and appraisal work, including technical and economic feasibility studies,


that may be carried out to determine whether a Discovery of Petroleum constitutes a


Commercial Discovery;


1.33 “Exploration Period” means the period commencing on the Effective Date and


continuing during the time provided for in Article 3.1 within which Contractor is


authorised to carry out Exploration Operations and shall include any periods of


extensions provided for in this Agreement. The period shall terminate with respect to


any Discovery Area on tire Date of Commercial Discovery in


Discovery Area;

















4


Petroleum Agreement, MOE/QNPC/VHol


1.34 “Exploration Well” means a well drilled in the course of Exploration Operations


conducted hereunder during the Exploration Period, but does not include an Appraisal


Well;


1.35 “Force Majeure” means any event beyond the reasonable control of the Party claiming


to be affected by such event which has not been brought about at its instance,


including, but not limited to, earthquake, storm, flood, lightning or other adverse


weather conditions, war, embargo, blockade, riot or civil disorder;


1.36 “Foreign National Employee” means an expatriate employee of Contractor, its


Affiliates, or its Sub-contractors who is not a citizen of Ghana;


1.37 “Ghana” means the territory of the Republic of Ghana and includes the sea. seabed


and subsoil, the continental shelf and all other areas within the jurisdiction of the


Republic of Ghana;


1.38 “Gross Negligence” means any act or failure to act by Contractor which was in


reckless disregard of, or in wanton indifference to, harmful consequences on the safety


of persons and/or on property which the Contractor knew, or should have known,


would result from its act or failure to act:


1.39 “Gross Production” means the total amount of Petroleum produced and saved from a


Development and Production Area during Production Operations which is not used by


Contractor in Petroleum Operations and is available for distribution to the Parties in


accordance with Article 10;


1.40 “Initial Interest’’ means the interest of GNPC in all Petroleum Operations provided for


in Article 2.4;





1.41 “Joint Management Committee (JMC)” means the committee established pursuant to


Article 6.1 hereof;


1.42 “Market Price” means the market price for Crude Oil delivered to Contractor under


Article 10 or to GNPC under Article 15 of this Agreement, as determined in


accordance with Article 11.7 hereof;


1.43 “Minister” means Minister for Energy;


1.44 “Month” means a month of the Calendar Year





1.45 “Natural Gas” means all hydrocarbons which are gaseous at 14.65 psia pressure and


sixty (60) degrees Fahrenheit temperature and includes wet gas, dry gas and residue


gas remaining after the extraction of liquid hydrocarbons from wet gas;


1.46 Non-Associated Gas” means Natural Gas produced from a well other than in


association with Crude Oil;





1.47 “Operator” means Vitol Upstream Ghana Limited or such other Party as may be


appointed by Contractor with the approval of GNPC and the State, which approval


shall not be unreasonably withheld.





1.48 “Paid Interest” means an interest held by GNPC in respect of which GNPC pays for


the conduct of Petroleum Operations as expressly provided in Article 2.7;y


1.49 “Party” means the State, GNPC or Contractor, as the case may be;














Petroleum Agreement, MOE/GNPG/Vitol 5





1.50 “Petroleum” means Crude Oil or Natural Gas or a combination of both;


1.51 “Petroleum Costs” means all expenditures made and costs incurred in conducting


Petroleum Operations hereunder determined in accordance with the Accounting Guide


1.52 attached hereto as Annex 2;


“Petroleum Income Tax Law” means the Petroleum Income Tax Law, 1987 (PNDCL


188);


1.53 “Petroleum Law” means the Petroleum (Exploration and Production) Law, 1984


(PNDCL 84);


1.54 “Petroleum Operations” means all activities, both in and outside Ghana, relating to the


Exploration for, Development, Production, handling and transportation of Petroleum


contemplated under this Agreement and includes Exploration Operations,


1.55 Development Operations and Production Operations and all activities in connection


therewith;


“Petroleum Product” means any product derived from Petroleum by any refining or


other process;


1.56 “Production” or “Production Operations” means activities not being Development





Operations undertaken in order to extract, save, treat, measure, handle, store and


transport Petroleum to storage and/or loading points and to carry out any type of


primary and secondary operations, including recycling, recompression, maintenance of


pressure and water flooding and all related activities such as planning and


administrative work and shall also include maintenance, repair and replacement of


facilities, and well workovers, conducted after the Date of Commencement of


Commercial Production of the respective Development and Production Area;





1.57 “Production Costs” means Petroleum Costs incurred in Production Operations;


1.58 “Quarter” means a Calendar Quarter, commencing January 1, April 1, July 1 or


October 1;


1.59 “Sole Expert” means the person appointed to resolve a dispute pursuant to Article





24.8 hereof;


1.60 “Sole Risk” means an operation conducted at the sole cost, risk and expense of GNPC





referred to in Article 9;


1.61 “Specified Rate” means the rate which the Bank of England, London, certifies to be





the London Interbank offered rate (LIBOR) in the London Interbank Eurodollar


market on thirty (30) day deposits, in effect on the last business day of the last


1.62 respective preceding month, plus one per cent (1%);


“Standard Cubic Foot” or “SCF” means the quantity of gas that occupies one (1) cubic


foot at 14.65 psia pressure and sixty (60) degrees Fahrenheit temperature;


1.63 “State” means the Government of the Republic of Ghana;


1.64 “Subcontractor” has the meaning assigned to that term in the Petroleum Income Tax





Law;


1.65 “Termination” means termination of this Agreement pursuant to Article 23 hereof;











6


Petroleum Agreement, MOE/GNPC/Vitol


1.66 “Work Programme” means the annual plan for the conduct of Petrol m Operations


prepared pursuant to Articles 6.4 and 6.5.































































































































































































7


Petroleum Agreement, MOE/GNPCA/itol


 ARTICLE 2








SCOPE OF THE AGREEMENT. INTERESTS OF THE PARTIES


AND CONTRACT AREA





2.1 This Agreement provides for the Exploration for and Development and Production of


Petroleum in the Contract Area by GNPC in association with Contractor.





2.2 Subject to the provisions of this Agreement. Contractor shall be responsible for the


execution of such Petroleum Operations as are required by the provisions of this


Agreement and subject to Article 9, is hereby appointed the exclusive entity to


conduct Petroleum Operations in the Contract Area. GNPC shall at all times


participate in the management of Petroleum Operations and in order that the Parties


may cooperate in the implementation of Petroleum Operations GNPC and Contractor


shall establish a Joint Management Committee, to conduct and manage Petroleum


Operations.


2.3 In the event that no Commercial Discovery is made in the Contract Area, or that Gross





Production achieved from the Contract Area is insufficient fully to reimburse


Contractor in accordance with the terms of this Agreement, then Contractor shall bear


its own loss; GNPC and the State shall have no obligations whatsoever to Contractor


in respect of such loss.





2.4 GNPC shall have a ten percent (10%) Initial Interest in all Petroleum Operations


under this Agreement. With respect to all Exploration and Development Operations


GNPC’s Initial Interest shall be a Carried Interest. With respect to all Production


Operations GNPC’s Initial Interest shall be a Paid Interest.





2.5 In addition to the Initial Interest provided for in Article 2.4, GNPC shall have the


option in respect of each Development and Production Area to contribute a


proportionate share not exceeding ten percent (10%) of all Development and


Production Costs in respect of such Development and Production Area, (or make


arrangements satisfactory to Contractor to that effect) thereby acquiring an Additional


Interest of up to ten percent (10%) in Petroleum Operations in such Development and


Production Area. GNPC shall notify Contractor of its option within ninety (90) days


of the Date of Commercial Discovery.





2.6 If GNPC opts to take an Additional Interest as provided for in Article 2.5 then within


six (6) months, GNPC shall reimburse Contractor for all expenditure attributable to


GNPC’s Additional Interest incurred from the Date of Commercial Discovery to the


date GNPC acquires the Additional Interest. GNPC shall so reimburse Contractor as


soon as it is reasonably possible after the date of such acquisition by GNPC.





2.7 For the avoidance of doubt GNPC shall only be liable to contribute to : to Petroleum


costs:




















8


Petroleum Agreement, MOB'GNPCA/itol


 a) incurred in respect of Development Operations in any Development and


Production Area and to the extent only of any Additional Interest acquired in


such Development and Production Area under Article 2.5; and


b) incurred in respect of Production Operations in any Development and Production





Area both to the extent of:


i) its ten percent (10%) Initial Interest; and





ii) any Additional Interest acquired in such Development and Production Area


under Article 2.5





2.8 GNPC may during the Exploration Period contribute to the seismic and exploratory


drilling programmes as specified in Article 4.3 by providing relevant services subject


to Article 20.3. Upon completion of the work associated with said contribution,


GNPC shall earn credit for the costs incurred toward its share, if any, of Development


Costs, should it elect to hold an Additional Interest pursuant to Article 2.5 above.


Such credit shall carry interest at the Specified Rate annually from the respective dates


such contributed costs were incurred until they are utilised as credits toward GNPC’s


Additional Interest pursuant to Article 2.5 above. If during the Exploration Period


GNPC has earned such credit and if GNPC elects not to hold an Additional Interest or


no Commercial Discovery is made in the Contract Area, Contractor shall reimburse


GNPC in an amount equivalent to the credit within sixty (60) days following the end


of the Exploration Period or Contractor's relinquishment of the entire Contract Area,


whichever first occurs. The actual amount of any credit earned by GNPC shall be the


fair market rates at which such services could be obtained under freely competitive


conditions at the time they were performed.


2.9 Upon notifying Contractor of its decision to acquire the Additional Interest pursuant





to Article 2.5, GNPC may specify in such notification one or more of the following:





a) that notwithstanding the provisions in Article 2.6, GNPC shall reimburse


Contractor in accordance with Article 10.1(d) for all expenditure attributable to


the Additional Interest which has been incurred from the Date of Commercial


Discovery until the date GNPC acquires the Additional Interest plus accrued


interest thereon at the Specified Rate from the date of GNPC’s acquisition of the


Additional Interest until the date all the expenditure (and accrued interest thereon)


is reimbursed in full; and/or


b) that Contractor shall fund all or part of GNPC’s total proportionate share of the





Development Costs in respect of the Additional Interest as they are incurred (such


share being referred to as the “Additional Interest Costs”); and/or





c) that all or part of the credit referred to in Article 2.8 (as specified by GNPC in the


notification) and the applicable interest thereon (together referred to as the “Credit


Amount”) shall be used to:





i) reduce the amount to be reimbursed to the Contractor pursuant to


Section 2.9(a); or











9


Petroleum Agreement, MO&GNPCA/itol


 ii) fund the Additional Interest Costs whether in whole or in part


depending on the monetary value of the credit amount.





2.10 Contractor shall have an obligation to provide the funding for the Additional Interest


Costs minus the credit amount (if any) notified to Contractor pursuant to Article


2.9(c)(ii). The funding referred to in this Article 2.10 shall carry interest at the


Specified Rate from the date the funding is provided by Contractor until the date the


funding (plus accrued interest thereon) has been repaid in full to Contractor by GNPC.


The funding and interest specified herein shall be referred to as the “Additional


Interest Funding’'.





2.11 The aggregate amount of the Additional Interest Funding shall be reimbursed to


Contractor by GNPC in accordance with Article 10.1(d).





2.12 Contractor’s participating interest in all Petroleum Operations and in all rights under


this Agreement shall be ninety per cent (90%), reduced proportionately at any given


time and in any given part of tire Contract Area by the participating interest of GNPC


pursuant to Article 2.5 or the Sole Risk interest of GNPC pursuant to Article 9.


2.13 As of the Effective Date, the Contract Area shall cover a total of approximately seven


hundred and forty (740) square kilometers as depicted by Annex One and shall from


time to time during the term of this Agreement be reduced according to the terms


herein. During the term of the Agreement, Contractor shall pay rentals to the State for


that area included within the Contract Area at the beginning of each Contract Year


according to the provisions of Article 12.2(v) below. /J)










































































Petroleum Agreement, MOE/GNPC/Vitol 10





 ARTICLE 3








EXPLORATION PERIOD


3.1 The Exploration Period shall begin on the Effective Date and shall not cover a period


of more than seven (7) years except as provided for in accordance with the Petroleum


Law.


a) The Exploration Period shall be divided into an Initial Exploration Period of two


(2) years ("Initial Exploration Period") and two (2) extension periods of one and a


half (1V2) years each (respectively "First Extension Period" and "Second


Extension Period") and where applicable the further periods for which provision


is made hereafter.


b) Where Contractor has fulfilled its work and expenditure obligations set out in


Article 4.3 before the end of the Initial Exploration Period or, as the case may be,


the First Extension Period, and has exercised its option by applying to the


Minister in writing for an extension into the next period, the Minister will be


deemed to have granted an extension into the First Extension Period or, as the


case may be, into the Second Extension Period.


c) For each well drilled by Contractor or with Contractor's participation during the


Initial Exploration Period beyond those referred to in Article 4.3, the Initial


Exploration Period shall be extended by three (3) months and the commencement


of each subsequent period shall be extended byjhree (3) months.


3.2 Following the end of the Second Extension Period, subject to the provisions of Article


3.4, Contractor will be entitled to an extension or extensions, by reference to Article 8,


of the Exploration Period as follows:


a) Where at the end of the Second Extension Period Contractor is drilling or testing


any well, Contractor shall be entitled to an extension for such further period as


may be reasonably required to enable Contractor to complete such work and


assess the results and, in the event that Contractor notifies the Minister that the


results from any such well show a Discovery which merits appraisal, Contractor


shall be entitled to a further extension for such period as may be reasonably


required to carry out an Appraisal Programme and determine whether the


Discovery constitutes a Commercial Discovery;


b) Where at the end of the Second Extension Period Contractor is engaged in the


conduct of an Appraisal Programme in respect of a Discovery which has not been


completed, Contractor shall be entitled to a further extension following the end of


the Second Extension for such period as may be reasonably required to complete


that Appraisal Programme and determine whether the Discovery constitutes a


Commercial Discovery;


c) Where at the end of the Second Extension Period Contractor has undertaken work


not falling under paragraphs (a) or (b) which is not completed, Contractor will be








Petroleum Agreement, MOE/GNPCA/itol 11





 entitled to a further extension following the end of the Second Extension Period


for such period as the Minister considers reasonable for the purpose of enabling


such work to be completed.





d) Where pursuant to Article 8 Contractor has before the end of the Second


Extension Period, including extensions under (a), (b) and (c) above, given to the


Minister a notice of Commercial Discovery, Contractor shall, if the Exploration


Period would otherwise have been terminated, be entitled to a further extension


of the Exploration Period in which to prepare the Development Plan in respect of


the Discovery Area to which that Development Plan relates until either:


i) the Minister has approved the Development Plan as set out in Article 8, or





ii) in the event that the Development Plan is not approved by the Minister as set


out in Article 8 and the matter or matters in issue between the Minister and


Contractor have been referred for resolution under Article 24, one (1) month


after the date on which the final decision thereunder has been given.





Where Contractor has during the Initial Exploration Period or, as the case may be,


during tire First Extension Period failed to fulfill its work and expenditure obligations


under Article 4 in respect of that period but has made reasonable arrangements to


remedy its default during the First Extension Period or, as the case may be, the Second


Extension Period, Contractor shall be entitled to an extension subject to such


reasonable terms and conditions as the Minister may stipulate to assure performance


of the work.


Save in respect of a Discovery Area:


3.4


a) in the circumstances and subject to the limitations set forth in Section 12 (3) of


the Petroleum Law; or


b) in a case falling within the provisions of Article 3.2 (d)





nothing in Article 3.2 shall be read or construed as requiring or permitting the


extension of the Exploration Period beyond seven (7) years from the Effective Date


except for reasons of Force Majeure.


The provisions of Article 3.2 (a), (b) and (c) so far as they relate to the duration of the


Extension Period to which Contractor will be entitled shall be read and construed as


requiring the Minister to give effect to the provisions of Article 8 relating to the time


within which Contractor must meet tire requirements of that Article.





























12


Petroleum Agreement, MOE/GNPC/Vltol


 ARTICLE 4





MINIMUM EXPLORATION PROGRAMME


4.1 Exploration Operations shall begin as soon as practicable and in any case not later


than sixty (60) days after the Effective Date


4.2 GNPC shall, at the request of Contractor, make available to it such records and


information relating to the Contract Area as are relevant to the performance of


Exploration Operations by Contractor and are in GNPC's possession, provided that


Contractor shall reimburse GNPC for tire costs reasonably incurred in procuring or


otherwise making such records and information available to Contractor.


4.3 Subject to the provisions of this Article, in discharge of its obligations to carry out


Exploration Operations in the Contract Area, Contractor shall during the several


phases into which the Exploration Period is divided carry out the work specified


hereinafter:


a) Initial Exploration Period: The Initial Exploration Period shall be thejjeriod


commencing on the Effective Date and terminating at the end of the two (2)


Contract Years;





Description of Work: By the end of the Initial Exploration Period, Contractor, at


its own expense, shall have undertaken the following work described below:





i) Contractor shall acquire, process and interpret:





(a) a minimum of six hundred square kilometers (600 km2) of 3-D


seismic data within the Contract Area;


(b) a further two hundred and fifty square kilometers (250km2)


outside the Contract Area to tie in the adjacent Sanzule and Hess


2007 3D surveys; and


(c) a single prime 2D line running at least seven (7) kilometers into


the full fold area of the Vanco 2006 3D survey.


Contractor has already completed the work described in Article 4.3(a)(i)


above.


ii) Contractor shall drill one (1) Exploration Well in the Contract Area.





Minimum Expenditure: Contractor’s minimum expenditure for the work


described in Article 4.3(a)(i) above shall be ten million U.S. Dollars (US


$10,000,000), which expenditure has already been incurred; and the Contractor’s


minimum expenditure for the work described in Article 4.3(a)(ii) above shall be


forty million dollars (US$40,000,000) or the cost of drilling one ("


Well pursuant to Article 4.6.











Petroleum Agreement, MOE/GNPC/Vitol 13





b) First Extension Period: Commencing at the end of the Initial Exploration Period


and terminating at the end of one and a half (1 Vi) Contract Years thereafter or at


the end of any extension to the First Extension Period pursuant to Article 3.1(c)


Description of Work: By the end of the First Extension Period Contractor, at its


own expense, shall drill one (1) Exploration Well in the Contract Area and if


required by Contractor, acquire additional data or re-process existing data to plan


the drilling of this Exploration Well.


Minimum Expenditure: Contractor’s minimum expenditure for the work in the


First Extension Period shall be forty million U.S. Dollars (U.S. S40,000.000) or


the cost of drilling one (1) Exploration Well pursuant to Article 4.6.


c) Second Extension Period: Commencing at the end of the First Extension Period


(or any extension thereof) and terminating at the end of one and a half (Wz)


Contract Years thereafter or at the end of any extension to the Second Extension


Period pursuant to Article 3.2.


Description of Work: Contractor shall drill one (1) Exploration Well in the


Contract Area and if required by Contractor, acquire additional data or re-process


existing data to plan the drilling of this Exploration Well.


Minimum Expenditure: Minimum expenditure for work in the Second


Extension Period shall be forty million U.S. Dollars (U.S. $40,000,000) or the


cost of drilling one (1) Exploration Well pursuant to Article 4.6.


d) Work and expenditures accomplished in any period in excess of the above


obligations may be applied as credit in satisfaction of obligations called for in any


other period. The fulfillment of any work obligation shall relieve Contractor of


the corresponding minimum expenditure obligation, but the fulfillment of any


minimum expenditure obligation shall not relieve Contractor of the corresponding


work obligation.


4.4 No Appraisal Wells drilled or seismic surveys carried out by Contractor as part of an


Appraisal Programme undertaken pursuant to Article 8 and no expenditure incurred


by Contractor in carrying out such Appraisal Programme shall be treated as


discharging the minimum work obligations under Article 4.3. If during the


Exploration Period, the Contractor drills a well within the Contract Area which


penetrates a structure which had been penetrated by a well drilled prior to the


Effective Date, the well shall be treated as an Exploration Well provided such a


structure was not associated with a Discovery as defined in this Agreement as a result


of the previous well drilled.


4.5 The seismic programme in Article 4.3(a), when combined with existing data, shall be


such as will enable a study of the regional geology of the Contract Area and the


preparation of a report thereon with appropriate maps, cross sections and illustrations,


as well as a geophysical survey of the Contract .Area which, when 1 ’ ' ith


existing data, shall provide:











Petroleum Agreement, MOE/GNPC/Vitol 14





a) a minimum seismic grid adequate to define prospective drill sites over


prospective closures as interpreted from data available to Contractor; and


b) a seismic evaluation of structural and stratigraphic conditions over the remaining


portions of the Contract Area.


4.6 Each Exploration Well shall be drilled at a location and to an objective depth


determined by Contractor in consultation with GNPC. Except as otherwise provided


in Article 4.7 below:


a) The Exploration Wells to be drilled in the Initial Exploration Period, the First


Extension Period and the Second Extension Period, shall be whichever of the


following is first encountered:





(i) the depth of ten thousand feet (10,000) feet measured from the Rotary


Table Kelly Bushing (RTKB); or


(ii) one thousand feet (1,000) feet into the Cenomanian formation; or


(iii) the depth at which Contractor encounters geological basement.


4.7 If in the course of drilling an Exploration Well the Contractor concludes that drilling


to the minimum depth specified in Article 4.6 above is impossible, impracticable or


imprudent in accordance with accepted international petroleum industry drilling and


engineering practice, then Contractor may plug and abandon the Exploration Well and


GNPC shall have the option of either:


a) waiving the minimum depth requirement, in which case Contractor will be


deemed to have satisfied the obligation to drill such Exploration Well; or


b) requiring Contractor to drill a substitute Exploration Well at a location


determined by Contractor in consultation with GNPC and to the minimum depth


set forth in Article 4.6 except that if in the course of drilling such substitute


Exploration Well Contractor establishes that drilling to the minimum depth


specified in Article 4.6 above is impossible, impracticable or imprudent in


accordance with accepted petroleum industry drilling and engineering practice,


then Contractor may plug and abandon the substitute Exploration Well and will


be deemed to have satisfied the obligation to drill one (1) Exploration Well.


The above option shall be exercised by GNPC within thirty (30) days from the


plugging and abandonment of the Exploration Well, and failure to exercise such


option shall constitute a waiver of the minimum depth requirement pursuant to (a)


above.





4.8 During the Exploration Period, Contractor shall have the right to perform additional


Exploration Operations, including without limitation performing gravity and magnetic


surveys, drilling stratigraphic wells and performing additional geqlogica^nd














Petroleum Agreement MOE/GNPC/Vitol 15





geophysical studies, provided the minimum work obligations are performed within the


applicable period.





4.9 During the Exploration Period, Contractor shall deliver to GNPC and the Minister


reports on Exploration Operations conducted during each Calendar Quarter within


thirty (30) days following the end of that Quarter. Further requests for information by


the Minister under Section 9(1) of the Petroleum Law shall be complied with within a


reasonable time and copies of documents and other material .containing such


information shall be provided to GNPC. -at)


























































































































Petroleum Agreement, MOE'GNPCA/itol 16





 ARTICLE 5








RELINQUISHMENT


5.1 Except as provided in Article 8.3, 8.9, 14.9 and 14.11, Contractor shall relinquish


portions of the Contract Area in the manner provided hereafter.


a) If on or before the expiration of the Initial Exploration Period, Contractor elects


to enter into the First Extension Period pursuant to Article 3.1(b) then at the


commencement of the First Extension Period the area retained shall be one


hundred per cent (100%) of the Contract Area as at the Effective Date;


b) If on or before the expiration of the First Extension Period, Contractor elects to


enter into the Second Extension Period pursuant to Article 3.1(b) then at the


commencement of the Second Extension Period the area retained shall be one


hundred per cent (100%) of the Contract Area as at the Effective Date;


c) On the expiration of the Second Extension Period, Contractor shall subject to


Article 5.2 relinquish the entire Contract Area.


5.2 The provisions of Article 5.1 shall not be read or construed as requiring Contractor to


relinquish any portion of the Contract Area which constitutes or forms part of either a


Discovery Area or a Development and Production Area.=Any Discovery Area within


the Contract Area shall not be relinquished for the sole reason that the Contractor


elects not to enter into the First Extension Period or the Second Extension Period or


on the expiry of the Second Extension Period.


5.3 Subject to Article 5.2, if at the end of the Initial Exploration Period or the First


Extension Period as the case may be Contractor elects not to enter into the First or


Second Extension Period Contractor shall relinquish the entire Contract Area.


5.4 Each area to be relinquished pursuant to this Article shall be selected by Contractor


and shall be measured as far as possible in tenns of continuous and compact units of a


size and shape which will permit the carrying out of Petroleum


relinquished portions.



































Petroleum Agreement, MOE/GNPCA/itol 17





 ARTICLE 6





JOINT MANAGEMENT COMMITTEE


6.1 In order that the Parties may at all times cooperate in the implementation of Petroleum


Operations, GNPC and Contractor shall not later than thirty (30) days after the


Effective Date establish a Joint Management Committee (JMC). Without prejudice to


the rights and obligations of Contractor for day-to-day management of the operations,


the JMC shall oversee and supervise the Petroleum Operations and ensure that all


approved Work Programmes and Development Plans are complied with and also that


accounting for costs and expenses and the maintenance of records and reports


concerning the Petroleum Operations are carried out in accordance with this


Agreement and the accounting principles and procedures generally accepted in the


international petroleum industry.


6.2 The composition of and distribution of functions within the JMC shall be as follows:


i) The JMC shall constitute of two (2) representatives of GNPC and two (2)


representatives of Contractor. GNPC and Contractor shall also designate a


substitute or alternate for each member. In the case of absence or incapacity of


a member of the JMC, Iris alternate shall automatically assume the rights and


obligations of the absent or incapacitated member;


ii) The Chairperson of the JMC shall be designated by GNPC from amongst the


members of the JMC;


iii) Contractor shall be responsible in consultation with GNPC for the preparation


of agenda and supporting documents for each meeting of the JMC and for


keeping records of the meetings and decisions of the JMC (GNPC shall have


the right to inspect all records of the JMC at any time);


iv) At any meeting of the JMC three (3) representatives shall form a quorum.


6.3 Meetings of the JMC shall be held and decisions taken as follows:


i) All meetings of the JMC shall be held in Accra or such other place as may be


agreed upon by members of the JMC;


ii) The JMC shall meet at least twice yearly and at such times as the members


may agree


iii) A meeting of the JMC may be convened by either Party giving not less than


twenty (20) days notice to the others or, in a case requiring urgent action,


notice of such lesser duration as the members may agree upon;


iv) Decisions of the JMC shall require unanimity provided, however, that


decisions and approvals required for budgets and day-to-day operational


matters associated with performing the Appraisal Progr ’ ‘he











Petroleum Agreement. MOE/GNPC/Vito! 18





iv) Contractor shall report any Discovery to GNPC immediately following such


Discovery and shall place before the JMC for review its Appraisal Programme


prior to submission thereof to the Minister. Within thirty (30) days of completion


of the Appraisal Programme a JMC meeting to discuss the appraisal shall be


convened to take place before submission of the detailed appraisal report


provided for in Article 8.7;


v) The JMC will review Work Programmes and budgets and any amendments or


revisions thereto, and Appraisal Programmes, submitted to it by Contractor


pursuant to this Article, and timely give such advice as it deems appropriate


which Contractor shall consider before submitting the Programme to GNPC and


the Minister for their information.


vi) After the date of the first Commercial Discovery, Contractor shall seek the


concurrence of GNPC’s JMC representatives, which concurrence shall not be


unreasonably withheld, on any proposal for the drilling of an Exploration Well or


wells not associated with the Commercial Discovery and not otherwise required


to be drilled under Article 4.3. If concurrence is not secured by Contractor,


Contractor may nevertheless elect to drill the Exploration Well or wells but the


costs of such well or wells shall be considered Petroleum Costs for AOE


purposes and a deductible cost for Ghana income tax purposes only in the event


there is a subsequent Commercial Discovery associated with the well or wells.


6.5 From the first occurring Date of Commercial Discovery the JMC shall have the


supervision of Petroleum Operations as follows:


i. Within sixty (60) days after the Date of Commercial Discovery Contractor shall


prepare and submit to the JMC for approval any revisions to its annual Work


Programme and budget that may be necessary for the remainder of that Contract


Year and for the rest of the Exploration Period;


ii. At least ninety (90) days before the commencement of each subsequent Calendar


Year Contractor shall submit to the JMC for review and approval a reasonably


detailed Work Programme and budget setting forth all Development and


Production Operations which Contractor proposes to carry out in that Calendar


Year and the estimated cost thereof and shall also give an indication of


Contractor’s plans for the succeeding Calendar Year:


iii. Within sixty (60) days of the Date of Commencement of Commercial Production


and thereafter not later than one hundred and twenty (120) days before the


commencement of each Calendar Year Contractor shall submit to the JMC for its


approval an annual production schedule which shall be in accordance with good


international oilfield practice, and shall be designed to provide the most efficient,


beneficial and timely production of the Petroleum resources.





6.6 The JMC shall approve lifting schedules prepared and submitted by the=Contractor for


Development and Production Areas as well as review all of Contractor’s, reports on


the conduct of Petroleum Operations.


yw











Petroleum Agreement, MOE/GNPCAfitol 20





6.7 The JMC shall approve Contractor’s insurance programme and the programmes for


training and technology transfer submitted by Contractor and the accompanying


budgets for such schemes and programmes.


6.8 If during any meeting of the JMC the Parties are unable to reach agreement


concerning any of the matters provided for in Article 6.5 and 6.6, the matter shall be


deferred for reconsideration at a further meeting of the JMC to be reconvened not later


than fifteen (15) days following the original meeting. Any of the Parties may provide


further information to the JMC at or prior to such meeting to assist the JMC resolve


the matters in dispute. If after such further meeting the Parties are still unable to reach


agreement, the matters in dispute shall immediately be referred to the Management of


the Parties and the Minister for resolution. If fifteen (15) days after the referral, there


is still no agreement, then at the request of e


resolved in accordance with Article 24.























































































































Petroleum Agreement, MOE/GNPC/Vitol 21





 ARTICLE 7











RIGHTS AND OBLIGATIONS OF CONTRACTOR AND GNPC


7.1 Subject to the provisions of this Agreement, Contractor shall be responsible for the


conduct of Petroleum Operations and shall:


a) conduct Petroleum Operations with utmost diligence, efficiency and economy, in


accordance with accepted petroleum industry practices, observing sound


technical and engineering practices using appropriate advanced technology and


effective equipment, machinery, materials and methods;


b) take all practicable steps to ensure compliance with Section 3 of the Petroleum


Law; including ensuring the recovery and prevention of waste of Petroleum in


the Contract Area in accordance with accepted petroleumjndustry practices;


c) prepare and maintain in Ghana full and accurate records of all Petroleum


Operations performed under this Agreement;


d) prepare and maintain accounts of all operations under this Agreement in such a


manner as to present a full and accurate record of the costs of such operations, in


accordance with the Accounting Guide: and


e) disclose to GNPC and the Minister any operating or other agreement among the


Parties that constitute Contractor relating to the Petroleum Operations hereunder,


which agreement shall not be inconsistent with the provisions of this Agreement.


7.2 In connection with its performance of Petroleum Operations. Contractor shall have the


right within the terms of applicable law;


a) to establish offices in Ghana and to assign to those offices such representatives as


it shall consider necessary for the purposes of this Agreement;


b) to use public lands for installation and operation of shore bases, and terminals,


harbours and related facilities, pipelines from fields to terminals and delivery


facilities, camps and other housing;


c) to receive licenses and permission to install and operate such communications


and transportation facilities as shall be necessary for the efficiency of its


operations;


d) to bring to Ghana such number of Foreign National Employees as shall be


necessary for its operations, including employees assigned on permanent or


resident status, with or without families, as well as those assign temporary


basis such as rotational (rota) employees;











Petroleum Agreement, MOE'GNPC/Vitol 22





e) to provide or arrange for reasonable housing, schooling and other amenities,


permanent and temporary, for its employees and to import personal and


household effects, furniture and vehicles, for the use of its personnel in Ghana;


f) to be solely responsible for provision of health, accident, pension and life


insurance benefit plans on its Foreign National Employees and their families; and


such employees shall not be required to participate in any insurance,


compensation or other employee or social benefit programs established in Ghana;


g) to have, together with its personnel, at all times the right of ingress to and egress


from its offices in Ghana, the Contract Area, and the facilities associated with


Petroleum Operations hereunder in Ghana including the offshore waters, using its


owned or chartered means of land, sea and air transportation;


h) to engage such Subcontractors, expatriate and national, including also


consultants, and to bring such Subcontractors and their personnel to Ghana as are


necessary in order to carry out the Petroleum Operations in a skillful, economic,


safe and expeditious manner; and said Subcontractors shall have the same rights


as Contractor specified in this Article 7.2 to the extent they are engaged by


Contractor for the Petroleum Operations hereunder.


7.3 GNPC shall assist Contractor in carrying out Contractor’s obligations expeditiously


and efficiently as stipulated in this Agreement, and in particular GNPC shall use its


best efforts to assist Contractor and its Subcontractors to;


a) establish supply bases and obtain necessary communications facilities, equipment


and supplies;


b) obtain necessary approvals to open bank accounts in Ghana;


c) subject to Article 21 hereof, obtain entry visas and work permits for such number


of Foreign National Employees of Contractor and its Subcontractors engaged in


Petroleum Operations and members of their families who will be resident in


Ghana, and make arrangements for their travel, arrival, medical services and


other necessary amenities;


d) comply with Ghana customs procedures and obtain permits for the importation of


necessary materials;


e) obtain the necessary permits to transport documents, samples or other forms of


data to foreign countries for the purpose of analysis or processing if such is


deemed necessary for the purposes of Petroleum Operations;


f) contact Government agencies dealing with fishing, meteorology, navigation and


communications as required; and


g) identify qualified Ghanaian personnel as candidates by


Contractor in Petroleum Operations.














Petroleum Agreement, MOE/GNPC/Vitol 23


7.4 All reasonable expenses incurred by GNPC in connection with any of the matters set


out in Article 7.3 above shall be borne by Contractor.


7.5 GNPC shall use its best efforts to render assistance to Contractor in emergencies and


major accidents, and such other assistance as may be requested by Contractor,


provided that any reasonable expenses involved in such assistance by


Contractor.





























































































































24


Petroleum Agreement, MOBGNPC/Vitol


 ARTICLE 8








COMMERCIAL1TY





8.1 Contractor shall notify the Minister and GNPC in writing as soon as possible after any


Discovery is made, but in any event not later than thirty (30) days after any Discovery


is made.


8.2 As soon as possible after the analysis of the test results of such Discovery is complete


and in any event not later than one hundred (100) days from the date of such


Discovery, Contractor shall by a further notice in writing to the Minister indicate


whether in the opinion of Contractor the Discovery merits appraisal.


8.3 Where the Contractor indicates that the Discovery does not merit appraisal, Contractor


shall, subject to Article 8.17 below, relinquish the Discovery Area associated with the


Discovery.


8.4 Where Contractor indicates that the Discovery merits appraisal. Contractor shall submit


to the Minister an Appraisal Programme to be carried out by Contractor in respect of


such Discovery.


8.5 Unless Contractor and the Minister otherwise agree in any particular case, Contractor


shall have a period of two (2) years from the date of Discovery to complete the Appraisal


Programme.





8.6 Contractor shall commence appraisal work within one hundred and eighty (180) days


from the date of submission of the Appraisal Programme to the Minister. Where the


Contractor is unable to commence appraisal work within one hundred and eighty


(180) days from the date of submission of the Appraisal Programme to the Minister,


GNPC shall be entitled to exercise the option provided for in Article 9.1 to enable


prompt appraisal, provided however that after Contractor actually embarks on


appraisal work or obtains an extension of time for such work this option may not be


exercised.





8.7 Not later than ninety (90) days from the date on which said Appraisal Programme


relating to the Discovery is completed Contractor will submit to the Minister a report


containing the results of the Appraisal Programme. Such report shall include all


available technical and economic data relevant to a determination of commerciality,


including, but not limited to, geological and geophysical conditions, such as structural


configuration, physical properties and the extent of reservoir rocks, areas, thickness


and depth of pay zones, pressure, volume and temperature analysis of the reservoir


fluids; preliminary estimates of Crude Oil and Natural Gas reserves; recovery drive


characteristics; anticipated production performance per reservoir and per well; fluid


characteristics, including gravity, sulphur percentage, sediment and water percentage


and refinery assay pattern.





8.8 Not later than ninety (90) days from the date on which the report containing the results


of the Appraisal Programme is submitted to the Minister, Contractor will Iw a











25


r.tnl


notice in writing, inform the Minister whether the Discovery in the opinion of


Contractor is or is not commercial.


8.9 If Contractor informs the Minister that the Discovery is not commercial, then subject


to Article 8.17, Contractor shall relinquish such Discovery Area; provided, however,


that in appropriate cases, before declaring that a Discovery is not commercial,


Contractor shall consult with GNPC and may make appropriate representations


proposing minor changes in the fiscal and other provisions of this Agreement which


may, in the opinion of Contractor, affect the determination of commerciality. The


other Parties may, where feasible, and in the best interests of the Parties agree to make


such changes or modifications in the existing arrangements.


8.10 If Contractor pursuant to Article 8.8 informs the Minister that the Discovery is


Commercial Contractor shall not later than one hundred and eighty (180) days


thereafter, prepare and submit to the Minister a Development Plan.


8.11 The Development Plan referred to in Article 8.10 shall be based on detailed


engineering studies and shall include:


a) Contractor’s proposals for the delineation of the proposed Development and


Production Area and for the development of any reservoir(s), including the


method for the disposal of Associated Gas in accordance with the provisions of


Article 14.4;


b) the way in which the Development and Production of the reservoir is planned to


be financed;


c) Contractor’s proposals relating to the spacing, drilling and completion of wells,


the production, storage, transportation and delivery facilities required for the


production, storage and transportation of the Petroleum, including without


limitation:


i) the estimated number, size and production capacity of production


platforms if any;


ii) the estimated number of Production wells;


iii) the particulars of feasible alternatives for transportation of the Petroleum,


including pipelines;


iv) the particulars of onshore installations required, including the type and


specifications or size thereof; and


v) the particulars of other technical equipment required for the operations;


d) the estimated production profiles for Crude Oil and Natural Gas from the


Petroleum reservoirs;





e) estimates of capital and operating expenditures;








Petroleum Agreement, MOE/GNPCA/itol 26


 notice in writing, inform the Minister whether the Discovery in the opinion of


Contractor is or is not commercial.





8.9 If Contractor informs the Minister that the Discovery is not commercial, then subject


to Article 8.17, Contractor shall relinquish such Discovery Area; provided, however,


that in appropriate cases, before declaring that a Discovery is not commercial.


Contractor shall consult with GNPC and may make appropriate representations


proposing minor changes in the fiscal and other provisions of this Agreement which


may, in the opinion of Contractor, affect the determination of commerciality. The


other Parties may, where feasible, and in the best interests of the Parties agree to make


such changes or modifications in the existing arrangements.


8.10 If Contractor pursuant to Article 8.8 informs the Minister that the Discovery is


Commercial Contractor shall not later than one hundred and eighty (180) days


thereafter, prepare and submit to the Minister a Development Plan.


8.11 The Development Plan referred to in Article 8.10 shall be based on detailed


engineering studies and shall include:


a) Contractor’s proposals for the delineation of the proposed Development and


Production Area and for the development of any reservoirs), including the


method for the disposal of Associated Gas in accordance with the provisions of


Article 14.4;


b) the way in which the Development and Production of the reservoir is planned to


be financed;


c) Contractor’s proposals relating to the spacing, drilling and completion of wells,


the production, storage, transportation and delivery facilities required for the


production, storage and transportation of the Petroleum, including without


limitation:


i) the estimated number, size and production capacity of production


platforms if any;


ii) the estimated number of Production wells;


iii) the particulars of feasible alternatives for transportation of the Petroleum,


including pipelines;


iv) the particulars of onshore installations required, including the type and


specifications or size thereof; and


v) the particulars of other technical equipment required for the operations;


d) the estimated production profiles for Crude Oil and Natural Gas from the


Petroleum reservoirs;





e) estimates of capital and operating expenditures;








Petroleum Agreement, MOE/GNPC/Vitol 26


f) the economic feasibility studies carried out by or for Contractor in respect of


alternative methods for Development of the Discovery, taking into account:


i) location;


ii) water depth (where applicable);


iii) meteorological conditions;


iv) estimates of capital and operating expenditures; and


v) any other relevant data and evaluation thereof;


g) the safety measures to be adopted in the course of the Development and


Production Operations, including measures to deal with emergencies;


h) the necessary measures to be taken for the protection of the environment;


i) Contractor’s proposals with respect to the procurement of goods and services


obtainable in Ghana;


j) Contractor’s plan for training and employment of Ghanaian nationals; and


k) the timetable for effecting Development Operations,


8.12 The date of the Minister’s approval of the Development Plan shall be the Date of


Commercial Discovery.


8.13 After thirty (30) days following its submission, the Development Plan shall be deemed


approved as submitted, unless the Minister has before the end of the said thirty (30)


day period given Contractor a notice in writing stating:


i) that the Development Plan as submitted has not been approved; and


ii) the revisions, proposed by the Minister, to the Development Plan as submitted,


and the reasons thereof.


8.14 Where the Development Plan is not approved by the Minister as provided under


Article 8.13 above, the Parties shall within a period of thirty (30) days from the date of


the notice by the Minister as referred to under Article 8.13 above meet to agree on the


revisions proposed by the Minister to the Development Plan. In the event of failure to


agree to the proposed revisions, within fourteen (14) days following said meeting any


matters in dispute between the Minister and the Contractor shall be referred for


resolution in accordance with Article 24.


8.15 Where the issue in dispute referred for resolution pursuant to Article 24 is finally


decided in favour of Contractor the Minister shall forthwith give the requisite


approval to the Development Plan submitted by Contractor.


8.16 Where the issue in question referred for resolution pursuant to Article 24 is finally


decided in favour of the Minister in whole or in part, Contractor shal











Petroleum Agreement, MOE/GNPC/Vitol 27


i) amend the proposed Development Plan to give effect to the final decision


rendered under Article 24, and the Minister shall give the requisite approval to


such revised Development Plan; or


ii) subject to Article 8.19 below relinquish the Discovery Area.


8.17 Notwithstanding the relinquishment provisions of Articles 8.3 and 8.9 above, if


Contractor indicates that a Discovery does not at the time merit appraisal, or after


appraisal does not appear to be commercial but may merit appraisal or potentially


become commercial at a later date during the Exploration Period, then Contractor


need not relinquish the Discovery Area and may continue its Exploration Operations


in the Contract Area during the Exploration Period provided that the Contractor shall


explain what additional evaluations, including Exploration work or studies, are or may


be planned in order to determine whether subsequent appraisal is warranted or that the


Discovery is commercial. Such evaluations shall be performed by Contractor


according to a specific timetable, to be determined by the JMC, subject to its right of


earlier relinquishment of the Discovery Area. After completion of the evaluations,


Contractor shall make the indications called for under Article 8.2 or 8.8 and either


proceed with appraisal, confirm commerciality or relinquish the Discovery Area. In


any case, if at the end of the Exploration Period Contractor has not indicated its intent


to proceed with an Appraisal Programme or that the Discovery is commercial, then the


Discovery Area shall be relinquished.


8.18 Before Contractor indicates that the Discovery will not merit appraisal, or after


appraisal will not be commercial, Contractor may consult with the other Parties and


may make appropriate representations proposing minor changes in the fiscal and other


provisions of this Agreement which may, in the opinion of Contractor, affect the


determination of commerciality. The other Parties may, agree to make such changes


or modifications in the existing arrangements. In the event the Parties do not agree on


such changes or modifications, then subject to Articles 8.17 and 8.19 Contractor shall


relinquish the Discovery Area.


8.19 Nothing in Article 8.3, 8.9, 8.16 or 8.17 above shall be read or construed as requiring


Contractor to relinquish:


a) any area which constitutes or fonns part of another Discovery Area in respect of


which:





i) Contractor has given the Minister a separate notice confirming that such


Discovery merits appraisal or confirmation; or


ii) Contractor has given the Minister a separate notice indicating that such





Discovery is commercial; or


b) any area which constitutes or forms part of a Development and " - 1 *’




















Petroleum Agreement, MOE/GNPC/Vltol 28





 ARTICLE 9








SOLE RISK ACCOUNT


9.1 Unless and until Contractor has notified GNPC that it wishes to appraise the


Discovery, GNPC may notify Contractor that it will at its Sole Risk commence to


appraise that Discovery, provided that within thirty (30) days of such notification from


GNPC, Contractor may elect to commence to appraise that Discovery within its Work


Programme.


9.2 Where an appraisal undertaken under Article 9.1 at the Sole Risk of GNPC results in a


determination that a Discovery is commercial, Contractor may develop the


Commercial Discovery upon reimbursement to GNPC of all expenses incurred in


undertaking the appraisal and arranging with GNPC satisfactory terms for the payment


of a premium equivalent to five hundred per cent (500%) of such expenses. Such


premium shall not be reckoned as cost of Petroleum Operations for the purpose of the


Accounting Guide. In the event that Contractor declines to develop said Discovery.


Contractor shall relinquish the Development and Production Area established by the


Appraisal Programme conducted by GNPC under Article 9.1.


9.3 During the Exploration Period GNPC may, at its Sole Risk, require Contractor to


continue drilling to penetrate and test horizons deeper than those contained in the


Work Programme of Contractor or required under Article 4. GNPC may also at its


Sole Risk ask the Contractor to test a zone or zones which Contractor has not included


in Contractor’s test programme. Notice of this shall be given to Contractor in writing


as early as possible prior to or during the drilling of the well, but in any case not after


Contractor has begun work to complete or abandon the well. The exercise by GNPC


of this right shall be in an agreed manner, which does not prevent Contractor from


complying with its work obligations under Article 4.3 and is subject to the Health,


Safety and Environmental (HS & E) considerations.


9.4 At any time before commencing such deeper drilling Contractor may elect to embody


the required drilling in its own exploration operation, in which case any resulting


Discovery shall not be affected by the provisions of this Article.


9.5 Where any Sole Risk deeper drilling results in a Discovery, GNPC shall have the


right, at its Sole Risk, to develop, produce and dispose of all Petroleum from that


deeper horizon, provided however that if at the time such Petroleum is tested from the


well, Contractor's Work Programme includes a well or wells to be drilled to the same


producing horizon, and provided that the well or wells result (s) in a Petroleum


producing well producing from the same horizon, Contractor shall, after reimbursing


GNPC for all costs associated with its Sole Risk deeper drilling in said well, have the


right to include production from that well in its total production for the purposes of


establishing a Commercial Discovery, and. if a Commercial Discovery is subsequently


9.6 Alternatively, if at the time such Petroleum is tested from the well, referred to=in


Article 9.5, Contractor’s Work Programme does not include a well to be drilled to the


same horizon, Contractor has the option to appraise and/or develop, as the case may


be, the Discovery for its account under the terms of this Agreement if it so elects


within a period of sixty (60) days after such Discovery. In such case, Contractor shall


reimburse GNPC for all expenses incurred by GNPC in connection with such Sole


Risk operations, and shall make satisfactory arrangements with GNPC for the


payment of a premium equivalent to five hundred percent (500%) of such expenses.


9.7 During the term of this Agreement, GNPC shall have the right, at its Sole Risk, and


upon six (6) months prior notice to Contractor, to drill one (1) or two (2) wells per


Calendar Year within the Contract Area provided that the work intended to be done by


GNPC had not been scheduled for a Work Programme to be performed by Contractor


and the exercise of such right by GNPC and the arrangement made by GNPC for


undertaking such drilling do not prevent Contractor from satisfying its work


obligations. Within thirty (30) days after receipt of such notice Contractor may elect to


drill the required well or wells as part of Contractor’s Exploration Operations.


9.8 In the event that a well drilled for the account and risk of GNPC in accordance with


Article 9.7 above results in a Discovery, GNPC shall have the right to appraise and


develop as the case may be or require Contractor to develop, after GNPC declares a


Commercial Discovery, such Commercial Discovery for a mutually agreed service


fee, so long as Contractor has an interest in the Contract Area, GNPC taking all the


interest risk and costs and hence having the right to all Petroleum produced from the


Commercial Discovery, provided however that Contractor has the option to appraise


and/or develop, as the case may be, the Discovery for its account under the terms of


this Agreement if it so elects within a period of sixty (60) days after receipt of


GNPC’s written notice of such Discovery.


9.9 Contractor shall reimburse GNPC for all expenses incurred by GNPC in connection


with such Sole Risk operations, and shall make satisfactory arrangements with GNPC


for the payment of a premium equivalent to five hundred percent (500%) of such


expenses before exercising the option under Article 9.8. Such premium shall not be


reckoned as Petroleum Costs for the purposes of Accounting Guide.


9.10 In the event that Contractor declines to develop the Commercial Discovery or no


agreement is reached on the service fee arrangement as provided for in Article 9.8.


Contractor shall relinquish the Development and Production Area associated with


such Commercial Discovery.


9.11 Sole Risk operations under this Article shall not extend the Exploration Period nor the


term of this Agreement and Contractor shall complete any agreed programme of work


commenced by it under this Article at GNPC’s Sole Risk, and subject to such


provisions hereof as the Parties shall then agree, even though the Exploration Period


as defined in Article 3 or the term of this Agreement may have expired.


9.12 GNPC shall indemnify and hold harmless Contractor against all actions, claims,


demands and proceedings whatsoever brought by any third party or the State, arising


out of or in connection with Sole Risk operations under this Article ° eM*'-.h











Petroleum Agreement. MOE/GNPC/Vitol 30





 actions, claims, demands and proceedings are caused by Contractor’s Gross





Negligence.




























































































































































































31


Petroleum Agreement. MOE/GNPCA/itol


 ARTICLE 10








SHARING OF CRUDE OIL





10.1 Gross Production of Crude Oil from each Development and Production Area shall


(subject to a Calendar Year adjustment developed under the provisions of Article


10.7) be distributed amongst the Parties in the following sequence and proportions:


a) Twelve and a half percent (\2Vi%) of the Gross Production of Crude Oil shall be


delivered to the State as ROYALTY', pursuant to the provisions of the Petroleum


Law. Upon notice to Contractor, the State shall have the right to elect to receive


cash in lieu of its royalty share of such Crude Oil. The State’s notice shall be


given to Contractor at least ninety (90) days in advance of each lifting period,


such periods to be established pursuant to the provisions of Article 10.7. In such


case, said share of Crude Oil shall be delivered to Contractor and it shall pay to


the State the value of said share in cash at the relevant weighted average Market


Price for the relevant period as determined in accordance with Article 11.7;


b) The State’s AOE (as hereinafter defined) share of Crude Oil, if any, shall be


distributed to the State out of the Contractor’s share of Crude Oil determined


under Article 10.1 (d). The State shall also have the right to elect to receive cash


in lieu of the AOE share of Crude Oil accorded to it pursuant to Article 10.2.


Notification of said election shall be given in the same notice in which the State


notifies Contractor of its election to receive cash in lieu of Crude Oil under


Article 10.1(a). In such case, said share shall be delivered to Contractor and it


shall pay to the State the value of said share in cash at the relevant weighted


average Market Price for the relevant period as determined in accordance with


Article 11.7;


c) The amount of Crude Oil, if any, shall be delivered to GNPC to which it is


entitled pursuant to its Sole Risk operations under Article 9, after distribution of


such amounts of Crude Oil as are required pursuant to Article 10.1(a);





d) After the distribution of such amounts of Crude Oil as are required pursuant to


Article 10.1(a) and (c), and subject to Article 10.1(e) below, and PROVIDED that


all Production Expenditure, as this term is defined in Section 2.4 of the


Accounting Guide (excluding all capital expenditures referred to in Article


10.1(e)), relating to the Crude Oil being distributed has been fully reimbursed to


the Party that funded it, the remaining Crude Oil produced from each


Development and Production Area shall be distributed to Contractor and GNPC


in the following order of priority;





i) first, an amount of Crude Oil shall be distributed to Contractor to reimburse


Contractor for all expenditure and accrued interest thereon attributable to the


Additional Interest as referred to in Article 2.9(a);




















Petroleum Agreement. MOE/GNPC/Vitol 32





ii) second, if Contractor has provided the Additional Interest Funding, an


amount of Crude Oil shall be distributed to Contractor to reimburse


Contractor for the Additional Interest Funding; and


iii) third, the remaining Crude Oil shall be distributed to each of Contractor and


GNPC in proportion to their respective participating interests referred to in


Article 2.


e) Contractor shall provide the funding for any capital expenditures approved by the


JMC. GNPC shall reimburse Contractor for GNPC's proportionate share, based


on its participating interest in the Petroleum Operations, of such capital


expenditures (plus accrued interest at the Specified Rate thereon from the date of


payment thereof by Contractor until the date GNPC reimburses Contractor for its


proportionate share and interest as specified above). The reimbursement shall be


made through Contractor receiving an amount of Crude Oil which would


otherwise have been distributed to GNPC pursuant to Article 10.1 (d);


f) The value of the Crude Oil used to reimburse any Party pursuant to Article


10.1(d) and Article 10.1(e) shall be the average Market Price as determined


pursuant to Article 11.7 for the Crude Oil delivered to Contractor in the Month of


its delivery.


10.2 At any time the State shall be entitled to a portion of Contractor’s share of Crude Oil


then being produced from each separate Development and Production Area which


may consist of one or more accumulations (hereinafter referred to as “Additional Oil


Entitlements” or “AOE”). The AOE shall be calculated on the basis of Contractor’s


NCF and the after-tax inflation-adjusted rates of return (“ROR”) referenced in the


formulae in Article 10.2(b) and shall be determined separately for each Development


and Production Area at the end of each Month in accordance with the formulae in


Article 10.2(b) below:


(a) Definitions:


“ NCF” means Contractor’s net cash flow for the Month for which the calculation is


being made, and shall be computed in accordance with the following formula:


NCF = x-y-z


where


“x” equals all revenues received during such Month by Contractor from the


Development and Production Area, including an amount computed by multiplying the


amount of Crude Oil taken by Contractor during such Month in accordance with


Article 10.1 (d) and (e); excluding such Crude Oil taken by Contractor for payment of


interest in respect of Petroleum Costs incurred by Contractor on GNPC’s behalf, by


the Market Price applicable to such Crude Oil during the Month when lifted, plus any


other proceeds specified in the Accounting Guide received by Contractor, including,


without limitation, the proceeds from the sale of any assets to which Contractor


continues to have title. For the avoidance of doubt, “x” shall not inc*











Petroleum Agreement. MOE/GNPC/Vitol 33





 from Crude Oil lifted by Contractor which is part of another Party’s entitlement (e.g.


Crude Oil purchased by Contractor from GNPC or the State) but shall include


revenues from Crude Oil owned by Contractor but lifted by another Party (e.g. Crude


Oil purchased by GNPC or the State from Contractor).


“y” equals one-twelfth (Via) of the income tax paid by the Contractor to the State with


respect to the Calendar Year in respect of the Development and Production Area. If


there are two (2) or more Development and Production Areas, the total income tax


paid by Contractor in accordance with the Petroleum Income Tax Law 1987 shall for


purposes of this calculation be allocated to the Development and Production Area on


the basis of hypothetical tax calculations for the separate Development and Production


Areas. The hypothetical tax calculation for each Development and Production Area


shall be determined by allocating the total amount of tax incurred for each Calendar


Year by Contractor under the Petroleum Income Tax Law to each Development and


Production Area based on the ratio that the chargeable income from a given


Development and Production Area bears to the total chargeable income of Contractor.


The chargeable income of Contractor is determined under section 2 of the Petroleum


Income Tax Law and the chargeable income of a Development and Production Area


shall be calculated by deducting from the gross income derived from or allocated to


that Area those expenses deductible under section 3 of the Petroleum Income Tax Law


which are reasonably allocable to that area. A negative chargeable income for an area


shall be treated as zero for purposes of this allocation and not more (or less) than the


total income tax paid by Contractor shall be allocated between the areas.


“z” equals all Petroleum Costs specified in the Accounting Guide and expended by


Contractor during such Month with respect to the Development and Production Area,


including any Petroleum Costs paid by Contractor on GNPC’s behalf, and not


reimbursed by GNPC within the Month, provided that all Petroleum Costs for


Exploration Operations not directly attributable to a specific Development and


Production Area shall for purposes of this calculation be allocated to the


Development and Production Area having the earliest date of Commencement of


Commercial Production; and provided further that for the purpose of the ROR


calculation Petroleum Costs shall not include any amounts in respect of interest on


loans obtained for the purposes of carrying out Petroleum Operations.


FAn or First Account is the net cash flows from the Development and Production Area


at the end of Month n, less the current value of the cumulative negative net cash flows


up to the end of the Month immediately preceding the Month in question, using a real


rate of return of 12.5% p.a. and inflation of i.


SAn or Second Account is the net cash flows from the Development and Production





Area for that Month, less the current value of any cumulative negative net cash flows


up to die end of the Month immediately preceding the Month in question, using a real


rate of return of 17.5% and inflation of i.





TAn or Third Account is the net cash flows from the Development and Production


Area at the end of Month n, less the current value of any cumulative negative net cash


flows up to the Month immediately preceding the Month in question, using a real rate


of return of 22.5% and inflation of i.











Petroleum Agreement, MO&GNPC/Vitol 34





 ZAn of Fourth Account is the net cash flows from tire Development and Production


Area for Month n, less the current value of any cumulative negative net cash flows up


to the end of the Month immediately preceding the Month in question, using a real


rate of return of 27.5% and inflation of i.


FA n-i shall equal FAn as of the last day of the Month immediately preceding the





Month in question if such FAn was negative, but shall equal zero if such FAn was a


positive number.





SAn-i shall equal SAn as of the last day of the Month immediately preceding the


Month in question if such SAn was negative, but shall equal zero if such SAn was a


positive number.


TAn.i shall equal TAn as of the last day of the Month immediately preceding the


Month in question if such TAn was negative, but shall equal zero if such TAn was a


positive number.


ZAn_i shall equal ZAn as of the last day of the Month immediately preceding the


Month in question if such ZAn was a negative number but shall equal zero if such ZAn


was a positive number, hi the AOE calculation for the first Month of Petroleum


Operations, FA„.j, SAn.t, TA^i and ZA„-i shall be zero.


“i” for the month in question equals the percentage change in the United States


Industrial Goods Wholesale Price Index (“USIGWPI) applicable for the Month


compared to that applicable for the same Month of the preceding Calendar Year. The


USIGWPI applicable for any Month shall be the index which uses data for the second


preceding Month i.e. January data for the March computation. If the USIGWPI


ceases to be published, a substitute U.S. Dollar-based price index shall be used.





“n” refers to the nth Month in question.


“n-1” refers to the Month immediately preceding the nth Month





b) Fonnulae:























In the calculation of SA„ an amount shall be subtracted from NCF identical to the


value of any AOE which would be due to the State if reference were made hereunder


only to the FAn.














Petroleum Agreement, MOE/GNPCA/itol 35





 TA, = («„_, (l + (°'2|-'))) + NCF








In the calculation of TAn an amount shall be subtracted from NCF identical to the


value of any AOE which would be due to the State if reference were made hereunder


only to the FAn and SAn.

















In the calculation of ZAn an amount shall be subtracted from NCF identical to the


value of any AOE which would be due to the State if reference were made hereunder


only to the F An, SAn and TAn.





In the event of a conflict between the definitions of the FAn, SAn, TAn and ZAn and


the mathematical formulae in Article 10.2(b). the mathematical formulae shall prevail.


c) Prospective Application:


The State’s AOE measured in barrels of oil will be as follows:





i) If FAn, SAn? TAn and ZAn are all negative, the State’s AOE for the


Month in question shall be zero:


ii) If FAn is positive and SAn, TA„ and ZAn are all negative, the State’s


AOE for the Month in question shall be equal to the absolute amount


resulting from the following monetary calculation:


Fifteen percent (15%) of the FAn for that Month divided by the weighted


average Market Price as determined in accordance with Article 11.7.


iii) If both FAn and SAn are positive, but both TAn and ZAn are negative, the


State’s AOE for the Month in question shall be equal to an absolute


amount resulting from the following monetary calculation:


the aggregate of fifteen percent (15%) of FAn for that Month plus


seventeen and one half percent (17.5%) of the SAn for that Month all


divided by the weighted average Market Price as determined in


accordance with Article 11.7.


iv) If FAn, SAn and TAn are all positive but ZAn is negative, the State’s


AOE for the Month in question shall be equal to the absolute amount


resulting from the following monetary calculation:


the aggregate of fifteen percent (15%) of the FAn for that Month plus


seventeen and one half percent (17.5%) of the SAn for th;








Petroleum Agreement, MOE/GNPCA/itol 36





twenty percent (20%) of the TAn for that Month all divided by the


weighted average Market Price as determined in accordance with Article


11.7.


v) If FAn, SAn, TAn and ZAn are all positive, the State’s AOE for the


Month in question shall be equal to the absolute amount resulting from


the following monetary calculation:


the aggregate of fifteen percent (15%) of the FAn for that Month plus


seventeen and one half percent (17.5%) of the SAn for that Month plus


twenty percent (20%) of the TAn for that Month plus twenty five percent


(25%) of the ZAn for that Month all divided by the weighted average


Market Price as determined in accordance with Article 11.7.


d) The AOE calculations shall be made in U.S. Dollars with all non-dollar


expenditures converted to U.S. Dollars in accordance with Section 1.3.5 of


Annex 2. When the AOE calculation cannot be definitively made because of


disagreement on the World Market Price or any other factor in the formulae,


then a provisional AOE calculation shall be made on the basis of best


estimates of such factors, and such provisional calculation shall be subject to


correction and revision upon the conclusive determination of such factors, and


appropriate retroactive adjustments shall be made.


e) The AOE shall be calculated on a monthly basis, with the AOE to be paid


commencing with the first Month following the Month in which the FAn, SAn,


TAn, or ZAn, (as applicable) becomes positive. Because the precise amount of


the AOE for a Calendar Year cannot be determined with certainty until after


the end of that Calendar year, deliveries (or payments in lieu) of the AOE with


respect to a Month shall be made during such Calendar Year based upon the


Contractor’s good faith estimates of the amounts owing, with any adjustments


following the end of the Calendar Year to be settled pursuant to the procedures


agreed to pursuant to Article 10.7. Final calculations of the AOE shall be


made within thirty (30) days following the filing by the Contractor of the


annual tax return for such Calendar year pursuant to the Petroleum Income Tax


Law, and the amount of the AOE shall be appropriately adjusted in the event


of a subsequent adjustment of the amount of tax owing on such term.


10.3 GNPC shall act as agent for the State in the collection of all Petroleum or money


accruing to the State under this Article and delivery or payment to GNPC by


Contractor shall discharge Contractor’s liability to deliver the share to the State.





10.4 The State or GNPC, having met the requirements of Article 15.1, may elect, in


accordance with terms and conditions to be mutually agreed by tire Parties, that all or


part of the Crude Oil to be distributed to the State or to GNPC pursuant to this Article


shall be sold and delivered by the State or GNPC to Contractor or its Affiliate for use


and disposal and in such case Contractor or its Affiliate shall pay to the State or to


GNPC, as the case may be, the Market Price for any Crude Oil so sold and delivered.


Market Price for purposes of this Article 10.4 shall be the amounts actually realised by


Contractor or said Affiliate on its resales of said Crude Oil in arm's length commercial














Petroleum Agreement. MOE'GNPC/Vitol


 transactions, or for its other resales or dispositions of said Crude Oil, based upon


world market prices determined in the manner specified in Article 11.7(b).





10.5 Ownership and risk of loss of all Crude Oil produced from the Contract Area which is


purchased, and all of its percentage Interest or other Crude Oil lifted, by Contractor


shall pass to Contractor at the outlet flange of the marine terminal or other storage


facility for loading into tankers or other transportation equipment referred to in Article


11.1.





10.6 Subject to the provisions of Article 15 hereof, Contractor shall have the right freely to


export and dispose of all the Petroleum allocated and/or delivered to it pursuant to this


Article.


10.7 The Parties shall through consultation enter into supplementary agreements


concerning Crude Oil lifting procedures, lifting and tanker schedules, loading


conditions, Crude Oil metering, and the settlement of lifting imbalances, if any,


among the Parties at the end of each Calendar Year. The Crude Oil to be distributed or


otherwise made available to the Parties in each Calendar Year in accordance with the


preceding provisions of this Article shall insofar as possible be in ~ ~ ' ’ il


monthly quantities.


































































































Petroleum Agreement, MOE/GNPC/Vitol 36





 ARTICLE 11








MEASUREMENT AND PRICING OF CRUDE OIL


11.1 Crude Oil shall be delivered by Contractor to storage tanks constructed, maintained


and operated in accordance with applicable laws and good oilfield practice. Crude Oil


shall be metered or otherwise measured for quantity and tested for quality in such


storage tanks for all purposes of this Agreement. Any Party may request that


measurements and tests be done by an internationally recognised inspection company.


Contractor shall arrange and pay for the conduct of any measurement, or test so


requested provided, however, that in the case of (1) a test requested for quality


purposes and (2) a test requested on metering (or measurement) devices, where the


test demonstrates that such devices are accurate within acceptable tolerances, the Party


requesting the test shall reimburse Contractor for the costs associated with the test or


tests.


11.2 GNPC or its authorised agent shall have the right;


a) to be present at and to observe such measurement of Crude Oil; and


b) to examine and test whatever appliances are used by Contractor therefor.


11.3 In the event that GNPC considers Contractor’s methods of measurement to be


inaccurate GNPC shall notify Contractor to this effect and the Parties shall meet


within ten (10) days of such notification to discuss the matter. Where after thirty (30)


days the Parties cannot agree over the issue they shall refer for resolution under


Article 24 the sole question of whether Contractor’s method of measuring Crude Oil


is accurate and reasonable. Retrospective adjustments to measurements shall be made


where necessary to give effect to the decision rendered under Article 24.


11.4 If upon the examination or testing of appliances provided for in Article 11.2 any such


appliances shall be discovered to be defective:


a) Contractor shall take immediate steps to repair or replace such appliance; and


b) subject to the establishment of the contrary, such error shall be deemed to have


existed for three (3) months or since the date of the last examination and testing,


whichever occurred more recently.


11.5 In the event that Contractor desires to adjust, repair or replace any measuring


appliance, it shall give GNPC reasonable notice to enable GNPC or its authorised


agent to be present.


11.6 Contractor shall keep full and accurate accounts concerning all Petroleum measured as


aforesaid and provide GNPC with copies thereof on a monthly basis, not later than ten


(10) days after the end of each Month.














Petroleum Agreement, MOE/GNPC/Vitol 39


11.7 The market price for Crude Oil delivered to Contractor hereunder shall be established


with respect to each lifting as follows:





a) On Crude Oil sold by Contractor in arm’s length commercial transactions, the


Market Price shall be the price actually realized by Contractor on such sales.


Sales in arm’s length commercial transactions shall mean sales to purchasers


independent of the seller, which do not involve Crude Oil exchange or barter


transactions, government to government transaction, sales directly or indirectly to


Affiliates, or sales involving consideration other than payment in U.S. Dollars or


currencies convertible thereto, or affected in whole or in part by considerations


other than the usual economic incentives for commercial arm’s length Crude Oil


sales;


b) On other sales by Contractor, on exports by Contractor without sale and on sales


under Article 15.2, the Market Price shall be determined by reference to world


market prices of comparable Crude Oils sold in arm’s length transactions for


export in the major world petroleum markets, and adjusted for oil quality, location


and conditions of pricing, delivery and payment;


c) If the quality of various Crude Oils produced from the Contract Area is different,


segregated and sold separately, the Market Price shall be determined separately for


each type sold and/or exported by Contractor, only to the extent that the different


quality grades remain segregated throughout to the point where they are sold.


However if grades of different quality are commingled into a common stream,


Contractor and GNPC shall agree on an equitable methodology for assessing the


relative value of each grade of Crude Oil comprising the blend, and shall


implement an equitable methodology to enable the producer of a higher quality


Crude Oil be reimbursed by the producer of a lower quality Crude Oil.


d) The price of Crude Oil shall be expressed in U.S. Dollars per barrel, F.O.B. the


point of delivery by Contractor.


11.8 Contractor shall notify GNPC of the Market Price determined by it for its respective


lifting during each Quarter not later than thirty (30) days after the end of that Quarter.


11.9 If GNPC considers that the price notified by Contractor was not correctly determined


in accordance with the provisions of Article 11.7, it shall so notify Contractor not later


than thirty (30) days after notification by Contractor of such price, and GNPC and


Contractor shall meet not later than twenty (20) days thereafter to agree on the correct


market price.


11.10 In the event that GNPC and Contractor fail to agree upon the commencement of


meetings for the purpose described in Article 11.9 above, or cannot agree on the


correct Market Price pursuant to Article 11.9, the Market Price shall be referred for


determination in accordance with Article 24 of this Agreement.




















Petroleum Agreement. MOE/GNPCA/itol 40


 ARTICLE 12








TAXATION AND OTHER IMPOSTS


12.1 No tax, duty, fee or other impost shall be imposed by the State or any political


subdivision on Contractor, its Subcontractors or its Affiliates in respect of activities


related to Petroleum Operations and to the sale and export of Petroleum other than as


provided in this Article.


12.2 Contractor shall be subject to the following:


i) Royalty as provided for in Article 10.1 (a);


ii) Income Tax in accordance with the Petroleum Income Tax Law 1987 (PNDC L.


188) levied at the rate of thirty-five percent (35%);


iii) Additional Oil Entitlement as provided for in Article 10.1(b);


iv) Payments for rental of Government property, public lands or for the provisions of


specific services requested by Contractor from public enterprises; provided,


however, that the rates charged Contractor for such rentals or services shall not


exceed the rates charged to other members of the public who receive similar


services or rentals;


v) Surface rentals payable to the State pursuant to Section 18 of the Petroleum Law


per square kilometre of the area remaining at the beginning of each Contract Year


as part of the Contract Area, in the amounts as set forth below.





Phase of Operation Surface Rentals Per Annum





Initial Exploration Period US S 30 per sq. km.


1 st Extension Period US S 50 per sq. km.





2nd Extension Period US S 75 per sq. km.





Development & Production Area US $100 per sq. km.





vi) Taxes, duties, fees or other imposts of a minor nature and amount insofar as they


do not relate to the stamping and registration of this (1) Agreement, (2) any


assignment of interest in this Agreement, or (3) any contract in respect of


Petroleum Operations between Contractor and any Subcontractor.


12.3 Save for withholding tax at a rate of five percent (5%) from the aggregate amount due


to any Subcontractor if and when required by Section 27 (1) of the Petroleum Income


Tax Law, Contractor shall not be obliged to withhold any amount in^respect of tax


from any sum due from Contractor to any Subcontractor.














Petroleum Agreement, MOE/GNPCA/itol 41


12.4 Contractor shall not be liable for any export tax on Petroleum exported from Ghana


and no duty or other charge shall be levied on such exports. Vessels or other means of


transport used in the export of Contractor’s Petroleum from Ghana shall not be liable


for any tax, duty or other charge by reason of their use for that purpose.


12.5 Subject to the local purchase obligations hereunder, Contractor and Subcontractors


may import into Ghana all plant, equipment and materials to be used solely and


exclusively in the conduct of Petroleum Operations without payment of customs and


other duties, taxes, fees and charges on imports save minor administrative charges;








PROVIDED THAT:





a) GNPC shall have the right of first refusal to purchase any item imported duty free


under this Article which is later sold in Ghana; and


b) where GNPC does not exercise its right of purchase Contractor may sell to any


other person only subject to all import duty and taxes as if such items were being


imported at the time of such sale; provided, however, that no duty or tax shall be


levied if the purchaser could have imported the item sold free of duty or tax under


an exemption similar to Contractor’s hereunder.


12.6 Foreign National Employees of Contractor or its Affiliates, and of its Subcontractors,


shall be permitted to import into Ghana free of import duty their personal and


household effects in accordance with Section 22.7 of PNDCL 64; provided, however,


that no property imported by such employee shall be resold by such employee in


Ghana except in accordance with Article 12.5.





12.7 Subject to GNPC’s rights under Article 19, Contractor, Subcontractors and Foreign


National Employees shall have the right to export from Ghana all previously imported


items as defined. Such exports shall be exempt from all customs and other duties,


taxes, fees and charges on exports save minor administrative charges.





12.8 The Ghana Income Tax law applicable generally to individuals who are not employed


in the petroleum industry shall apply in the same fashion and at the same rates to


employees of Contractor, its Affiliates and its Subcontractors; provided, however, that


Foreign National Employees of Contractor, its Affiliates, and its Subcontractors shall


be exempt from the income tax and withholding tax liabilities if they' axe resident in


Ghana for thirty (30) days or less in any Calendar Year. G>j\k





N (/



































42


Petroleum Agreement. MOE/GNPC/Vitol


 ARTICLE 13








FOREIGN EXCHANGE TRANSACTIONS


13.1 Contractor shall for the purpose of this Agreement be entitled to receive, remit, keep


and utilise freely abroad all the foreign currency obtained from the sales of the


Petroleum assigned to it by this Agreement or purchased hereunder, or from transfers,


as well as its own capital, receipts from loans and in general all assets thereby


acquired abroad. Upon making adequate arrangements with regard to its commitment


to conduct Petroleum Operations, Contractor shall be free to dispose of this foreign


currency or assets as it deems fit.


13.2 Contractor shall have the right to open and maintain in Ghana bank accounts in


foreign currency and Ghanaian currency. No restriction shall be made on the import


by Contractor in an authorised maimer of funds assigned to the performance of the


Petroleum Operations and Contractor shall be entitled to purchase Ghanaian currency


through authorised means, without discrimination, at the prevailing rate of exchange;


provided, however, that such prevailing rate applicable to Contractor hereunder for all


transactions for converting Ghanaian currency into U.S. Dollars, and vice versa, shall


be at a buying or selling rate of=exchange. as the case may be, not less favourable to


Contractor than that quoted by the State or its foreign exchange control authority to


any person or entity on the dates of such conversion (excepting those special rates


provided by the State to discretely defined groups for special, limited purposes).


13.3 Contractor shall be entitled to convert in an authorised manner into foreign currencies


of its choice funds imported by Contractor for the Petroleum Operations and held in


Ghana which exceeds its local requirements at the prevailing rate of exchange referred


to in Article 13.2 and remit and retain such foreign currencies outside Ghana.


13.4 In the event of resale by Contractor or its Affiliate of Crude Oil purchased from the


State or GNPC, the State or GNPC shall have the right to request payment for such


sales of its share of production to Contractor or its Affiliate to be held in the foreign


currency in which the resale transaction took place or in U.S. Dollars.


13.5 Contractor shall have the right to make direct payments outside of Ghana from its


home offices and elsewhere, to its Foreign National Employees, and to those of its


Subcontractors and suppliers ‘not resident in Ghana’ (as that term is defined in


Section 160 of the Internal Revenue Act 2000 (Act 592) for wages, salaries, purchases


of goods and performance of services, whether imported into Ghana or supplied or


performed therein for Petroleum Operations carried out hereunder, in accordance with


the provisions of this Agreement, in respect of services performed within the


framework of this Agreement, and such payments shall be considered as part of the


costs incurred in Petroleum Operations.


13.6 In the event of any changes in the location of Operator’s home or other offices,


Operator shall so notify GNPC and the State.














Petroleum Agreement. MO&GNPC/Vito! 43





13.7 All payments which this Agreement obligates Contractor to make to GNPC or the


State, including income taxes, shall be made in U.S. Dollars, except as requested


otherwise pursuant to Article 13.4 above. All payments shall be made by the


appropriate means of transfer, in immediately available funds to a bank to be


designated by GNPC or the State, and reasonably accessible to Contractor by way of


its being able to receive payments made by Contractor and give a confirmation of


receipt thereof, or in such other manner as may be mutually agreed.


13.8 All payments, which this Agreement obligates GNPC or the State to make to


Contractor, shall be made in U.S. Dollars. All payments shall be made by the


appropriate means of transfer in immediately available funds to a commercial bank to


be designated by Contractor, and reasonably accessible to GNPC or the State by way


of its being able to receive payments made by GNPC or the State and give


confirmation of receipt thereof, or in such other manner as may be m














































































































44


Petroleum Agreement, MOE/GNPC/Vitol


 ARTICLE 14








SPECIAL PROVISIONS FOR NATURAL GAS





PART I - GENERAL


14.1 Contractor shall have the right to use Natural Gas produced from any Development


and Production Area for Petroleum Operation within the Contract Area such as


reinjection for pressure maintenance and/or power generation.


14.2 Contractor shall have the right to flare Natural Gas:


a) to the extent provided in an approved Development Plan;


b) during production testing operations, including extended well testing operations


with respect to crude oil;


c) when required for the safety of persons engaged in Petroleum Operations in


accordance with petroleum industry practice;


d) where reinjection is inadvisable from the point of view of good reservoir or


petroleum engineering practice; or


e) as otherwise authorised by the Minister.


14.3 Contractor shall have the right to extract condensate and Natural Gas liquids for


disposition under the provisions relating to Crude Oil. Residual Natural Gas


remaining after the extraction of condensate and Natural Gas liquids is subject to the


provisions of this Article.





PART II -ASSOCIATED GAS





14.4 Based on the principle of full utilisation of Associated Gas and without substantial


impediment to Crude Oil production, the Development Plan of each Development and


Production Area shall include a plan of utilisation for Associated Gas.


14.5 If Contractor considers that production processing and utilisation of Associated Gas


from any Development and Production Area to be non-economic, GNPC shall have


the option to offtake such Associated Gas at the outlet flange of the gas-oil separator


at its Sole Risk for its own use and to that end the Development Plan proposed by


Contractor shall include:





a) a statement of the facilities necessary for the delivery to GNPC of such


Associated Gas; and





b) a plan for the reinjection of such Associated Gas into the reservoir.^








------ 45


14.6 If GNPC elects to offtake Associated Gas under Article 14.5 above, GNPC shall pay


for the cost of any additional facilities and any related production cost required for the


delivery of the gas to GNPC, provided that:


a) if Contractor subsequently wishes to participate in GNPC’s gas utilisation


programme, it shall reimburse GNPC for the costs of such facilities plus a


premium of two hundred percent (200%); or


b) if Contractor subsequently develops a gas utilisation programme and requires the


use of such facilities, Contractor shall pay GNPC an agreed fee for such use.


PART III - NON-ASSOCIATED GAS


14.7 Contractor shall notify the Minister in writing as soon as any Discovery of Non-


Associated Gas is made in the Contract Area.


14.8 As soon as possible after the technical evaluation of the test results of such Discovery


is complete and in any event not later than one hundred eighty (180) days from the


date of Discovery, Contractor shall by a further notice in writing to the Minister (the


“Notice”) indicate whether in Contractor’s opinion the Discovery merits appraisal.


14.9 Where Contractor’s Notice indicates that the Discovery does not at that time merit


appraisal but may merit appraisal or additional evaluation at a later date during the


Exploration Period or during the initial period under a new Agreement made pursuant


to Article 14.18 below, then Contractor need not submit a proposed Appraisal


Programme at that time but instead shall indicate what other studies or evaluations


may be warranted before an Appraisal Programme is undertaken. Where Contractor’s


Notice indicates that the Discovery will not merit appraisal at any time during the


Exploration Period or during the initial period under a new Agreement made pursuant


to Article 14.18, then GNPC may by notice to Contractor require Contractor to


relinquish the rights to the Non-Associated Gas within that Discovery Area.


14.10 Where Contractor’s Notice indicates that the Discovery merits the drilling of one or


more Appraisal Wells at that time, Contractor shall prepare and submit to the JMC the


appropriate Appraisal Programme which shall be scheduled to be completed within


two (2) years of the submission of the Notice to the Minister.


14.11 Not later than ninety (90) days from the date on which the Appraisal Programme


relating to a Discovery is concluded, Contractor shall submit to the Minister a report


containing the results of the Appraisal Programme. If the report concludes that the


Discovery merits commercial assessment. Contractor shall notify the Minister within


one hundred eighty (180) days from the date on which the Appraisal Programme


relating to the Discovery was completed of a programme of such assessment and shall


conduct such programme during the=rest of the Exploration Period and, if applicable,


during the initial period under a new Agreement made pursuant to Article 14.18.


Notwithstanding the above, Contractor may also notify the Minister that commercial


assessment of the Discovery is not warranted at that time but the Disco








Petroleum Agreement, MOE/GNPC/Vitol 46





such assessment at a later date during the Exploration Period or during the initial


period referred to above. If Contractor so notifies the Minister. Contractor shall also


indicate what other studies or evaluation may be warranted before a commercial


assessment is undertaken.


14.12 The purpose of the commercial assessment shall be to study the uses to which


production from the Discovery Area, separately or together with any Associated=Gas


can be devoted and whether involving exports or domestic utilisation. As part of the


assessment, the Parties shall also pursue discussions on the required contractual


arrangements for disposition of the Natural Gas to potential purchasers and/or


consumers of the Natural Gas.


14.13 Contractor may consult with the other Parties and may make appropriate


representations proposing changes in the fiscal and other provisions of this Agreement


which may, in the opinion of Contractor, affect the above determinations made


pursuant to Articles 14.10 and 14.11. The other Parties may, where feasible and in the


best interests of the Parties, agree to make such changes or modifications in the


existing arrangements.


14.14 Nothing in this Part III of Article 14 shall be read or construed as requiring Contractor


to relinquish any area


i) which constitutes or forms part of another Discovery Area in respect of which


Contractor has given to the Minister a separate notice confirming that such


Discovery merits confirmation or commercial assessment; or


ii) which constitutes or forms part of a Development and Production Area.


PART IV NATURAL GAS PROJECTS


14.15 If at any time during the commercial assessment Contractor informs the Minister in


writing that the Discovery can be produced commercially, it shall as soon as


reasonably possible thereafter submit to the Minister and to GNPC its proposals for an


agreement relating to the development of the Discovery on the principles set forth in


this Part IV of Article 14. The State and GNPC undertake on receipt of such notice to


negotiate in good faith with Contractor with a view to reaching agreement on terms


for such production. Any such agreement will be based on terms and fiscal


requirements which shall be no less favourable to Contractor than those provided for


in Articles 10 and 11 and which take full account of the legitimate interest of the State


as the resource owner.





14.16 If at any time during the commercial assessment Contractor has identified a market in


Ghana for the reserves of Associated Gas and/or Non-Associated Gas or any part


thereof that can be saved without prejudice to an export project, the Parties shall


proceed in good faith to negotiate the appropriate contractual arrangements for the


disposition of the gas. In the event that there is a domestic market for such gas,


Contractor shall receive for delivery onshore of its share of the gas














Petroleum Agreement, MOE/GNPC/Vitol 47





agreed between GNPC and Contractor taking into account among other things the cost


of developing the gas and the uses which will be made of the gas.


14.17 In the event of a Discovery of Natural Gas in the Contract Area which is to be


developed and commercially produced, the provisions of this Agreement in respect to


interests, rights and obligations of the Parties regarding Crude Oil shall apply to


Natural Gas, with the necessary changes in points of detail, except with respect to


specific provisions in this Agreement concerning Natural Gas and different or


additional provisions concerning Natural Gas which may be agreed by the Parties in


the future.





a) The system for the allocation of Natural Gas among the Parties shall follow the


same general format as Article 10.1 provides for Crude Oil, with the exception


that the royalty to be delivered to the State on Natural Gas shall be at the rate of


seven and a half percent (7/4%) of the annual Gross Production of Natural Gas as


an incentive to enhance the viability of a gas project on the basis herein provided


for.





b) The Parties recognise that projects for the Development and Production of


Natural Gas are generally long-term in nature for both the project developers and


the customers who purchase the Natural Gas. Substantial investments and


dedication of facilities require long-term commitments on both sides. This


Agreement, being for a specific term of years, may not cover the length of time


for which customers in given cases will require commitments on the part of the


Parties to this Agreement to deliver their respective shares of the output.


Accordingly the Parties agree to consider undertaking such commitments where


reasonably required for the efficient and viable development of a Natural Gas


project. It is recognised that, unless otherwise agreed by the Parties hereto,


Contractor will have no right or interest in the project or the Natural Gas


produced and delivered after the term of this Agreement has expired.


c) In the event that Contractor or an Affiliate decides to construct facilities to





receive Natural Gas from the Development and Production Area for further


processing or for use as a feedstock or fuel in order to convert such Natural Gas


into one or more commercially marketable products, the Contractor shall be


entitled to pay for such gas the price paid by the State or GNPC under Article


14.16.





d) The Parties will consider collaboration in obtaining any common external


financing available for Natural Gas processing or Natural Gas utilisation


facilities, including project financing; however, each Party shall remain free to


finance externally its share of such facilities to the extent it prefers to do so.





14.18 a) Where Contractor has during the continuance of the Exploration Period made a


Discovery of Non-Associated Gas but has not before the end of the Exploration


Period declared that Discovery to be commercial, the State and GNPC will, if


Contractor so requests, enter into a new Petroleum Agreement with Contractor in


respect of the Discovery Area to which that Discovery relates;














48


Petroleum Agreement, MOE/GNPC/Vitol


 b) The State and GNPC shall not be under any obligation to enter into an Agreement


pursuant to Article 14.18(a) unless before the end of the Exploration Period


Contractor has carried out an Appraisal Programme in respect of that Discovery


pursuant to Article 14.10 and submitted to the Minister a report thereon pursuant


to Article 14.11, or has notified the Minister of reasonable arrangements to


undertake and complete such an Appraisal Programme during the period


provided for in Article 14.18 (c) (i) below:


c) A Petroleum Agreement entered into pursuant to Article 14.18 (a):





i) shall unless the Discovery in respect of which the Agreement has been


made is declared by Contractor to be commercial continue in force for an


initial period not exceeding five (5) years;


ii) shall in the event that the Discovery is declared by Contractor to be


commercial





a) continue in force for an aggregate period not exceeding thirty (30)


years;


b) include, or be deemed to include, all the provisions which, mutatis


mutandis, would have applied to a commercial Discovery of Non-


Associated Gas if Contractor had declared such Discovery to be


commercial under this Agreement;


iii) shall contain in respect of the initial period or of any renewal period


details of the evaluations or studies which Contractor proposes to


undertake in order to determine or keep under review the commerciality


of the Discovery


iv) shall confer on GNPC preemptive rights in respect of the gas contained in


the reservoir to which the Discovery relates substantially in the form of


the provisions hereinafter set out in Article 14.18 (e).


In the event that the Parties acting in good faith are unable to agree to the





detailed terms of the Petroleum Agreement contemplated in Article 14.18(a)


and the Exploration Period expires, GNPC itself, or a third party may, at its


Sole Risk, complete the Appraisal Programme relating to the Discovery and/or


develop the Discovery, provided that Contractor shall have the right of first


refusal in respect of any transaction proposed by GNPC or such third party for


the development of the Discovery.


d) Where Contractor has not, before the end of the initial period referred to in


Article 14.18(c)(i), declared the Discovery to be commercial and the Minister


has in his discretion determined that further evaluation or studies may be


required before the Discovery can be declared commercial, the right of


Contractor to retain the Discovery Area shall continue for a further period not


exceeding in the aggregate five (5) years. The right of Contractor to retain the














Petroleum Agreement, MOE/GNPCMot


 referred to in Article 14.18 (a) or where necessary by a new Agreement entered


into by the Parties for that purpose.





e) i) Where Contractor has not declared the Discovery to be commercial, if


GNPC has identified a market for the gas contained in the reservoir to


which the Discovery relates, or any part thereof, it may at any time during


the initial period or the aggregate period referred to in Article 14.18 (d)


above serve on Contractor a notice giving particulars of the quantities of


gas required to serve that market and the purchase price offered;


ii) Within three (3) months from the receipt of the notice referred to in





Article 14.18(e)(1), Contractor may declare the Discovery to be


commercial and in accordance with the Agreement and the Petroleum


Law prepare and submit to the Minister a Development Plan for the


production of the gas in association with GNPC to serve the market


identified at the price offered;





iii) If Contractor has not, within the period of three (3) months aforesaid,


declared the Discovery to be commercial, GNPC may at its Sole Risk


develop the Discovery to the extent necessary to meet the requirements of


the market identified as aforesaid, and in that event the Contractor shall


cease to have any rights in respect of the gas in the J fr>r


that purpose.



















































































50


Petroleum Agreement, MOE/GNPC/Vitol


 ARTICLE 15








DOMESTIC SUPPLY REQUIREMENTS (CRUDE OIL!





15.1 Crude Oil for consumption in Ghana (in this Article called the “Domestic Supply


Requirement”) shall be supplied, to the extent possible, by the State and GNPC from


their respective entitlements under this Agreement and under any other contract for


the production of Crude Oil in Ghana.





15.2 In the event that Crude Oil available to the State pursuant to Article 15.1 is


insufficient to fulfill the Domestic Supply Requirements, Contractor shall be obliged


together with any third parties which produce Crude Oil in Ghana, to supply a volume


of Crude Oil to be used for such Domestic Supply Requirements, calculated on the


basis of the ratio of Contractor’s entitlement to Crude Oil under Article 10.1 (d) to the


similar entitlements of all such third parties and provided that Contractor’s obligation


to supply Crude Oil for purposes of meeting the Domestic Supply Requirement shall


not exceed the total of Contractor’s said entitlement under this Agreement. GNPC


shall purchase any Crude Oil supplied by Contractor pursuant to this Article at the


weighted average Market Price determined under Article 11.7 for the Month of


delivery, and GNPC shall pay such prices in accordance with Article 13.8 within


thirty (30) days after receipt of invoice, failing which Contractor’s obligations in


respect of the Domestic Supply Requirement under this Article 15 shall be suspended


until payment is made good, at which time deliveries shall be resumed subject to any


alternative commitments that may have been reasonably entered into by Contractor to


dispose of the Domestic Supply Requirement Crude Oil during the period of default


in payment. /
















































































Petroleum Agreement, MOE'GNPC/Vitol


 ARTICLE 16








INFORMATION AND REPORTS: CONFIDENTIALITY


16.1 Contractor shall keep GNPC regularly and fully informed of operations being carried


out by Contractor and provide GNPC with all information, data, (film, paper and


digital forms), samples, interpretations and reports, (including progress and


completion reports) including but not limited to the following:


a) processed seismic data and interpretations thereof;


b) well data, including but not limited to electric logs and other wireline surveys,


and mud logging reports and logs, samples of cuttings and cores and analyses


made therefrom;


c) any reports prepared from drilling data or geological or geophysical data,


including maps or illustrations derived therefrom:


d) well testing and well completion reports;


e) reports dealing with location surveys, seabed conditions and seafloor hazards and


any other reports dealing with well, platfonn or pipeline locations;


f) reservoir investigations and estimates regarding reserves, field limits and


economic evaluations relating to future operations;


g) daily, weekly, monthly and other regular reports on Petroleum Operations;


h) comprehensive final reports upon the completion of each specific project or


operation;


i) contingency programmes and reports on safety and accidents;


j) procurement plans, Subcontractors and contracts for the provision of services to


Contractor.





Data shall be provided on film, paper and in digital format. In respect of the reports,


including text and graphics, paper and digital copies shall be submitted.


16.2 Contractor shall have the right to retain for its own use in connection with the conduct


of Petroleum Operations under this Agreement copies of data, well logs, maps,


magnetic tapes, other geological and geophysical information, portions of core


samples and copies of reports, studies and analyses, referred to in Article 16.1.





16.3 Not later than ninety (90) days following the end of each Calendar Year, Contractor


shall submit to GNPC a report covering Petroleum Operations performed in the


Contract Area during such Calendar Year. Such report shall include, but not be


limited to:


W2*





Petroleum Agreement. MOE/GNPCA/itol 52


a) a statement of the number of Exploration Wells, Appraisal Wells and


Development Wells drilled, the depth of each such well, and a map on which


drilling locations are indicated;


b) a statement of any Petroleum encountered during Petroleum Operations, as well


as a statement of any fresh water layers encountered and of any other minerals


discovered;


c) a statement of the quantity of Petroleum produced and of all other minerals


produced therewith from the same reservoir or deposit;


d) a summary of the nature and extent of all exploration activities in the Contract


Area;


e) a general summary of all Petroleum Operations in the Contract Area; and


f) a statement of the number of employees engaged in Petroleum Operations in


Ghana, identified as Ghanaian or non-Ghanaian. Contractor will give GNPC the


details of the nationality of the personnel employed by Contractor as required by


GNPC.


16.4 All data, information and reports including interpretation and analysis supplied by


Contractor pursuant to this Agreement shall be treated as confidential and shall not be


disclosed by any Party to any other person without the express written consent of the


other Parties.


16.5 The provisions of Article 16.4 shall not prevent disclosure:


a) by GNPC or the State:


i) to any agency of the State or to any adviser or consultant to GNPC or the


State; or


ii) for the purpose of obtaining a Petroleum Agreement from a third party in


respect of any acreage adjacent to the Contract Area provided Contractor


is notified concerning such disclosure and subject to approval of


Contractor (not to be unreasonably withheld);


b) by Contractor:


i) to its Affiliates, advisers or consultants:


ii) to a bona fide potential assignee of all or part of Contractor’s interest


hereunder provided GNPC is notified concerning such potential


iii) to banks or other lending institutions for the purpose of seeking external


financing of costs of the Petroleum Operations;


iv) to non-Affiliates who are providing services for the Petroleum


Operations, including Subcontractors, vendors and other service


contractors, where this is essential for their provision of such services,


and provided GNPC is notified about such disclosure;


v) to governmental agencies for obtaining necessary rulings, permits,


licenses and approvals, or as may be required by applicable law or


financial stock exchange, accounting or reporting practices, and provided


GNPC is notified about such disclosure; or


vi) to such persons and for such purposes as the Joint Management


Committee may permit from time to time.


c) by any Party:


i) to the extent necessary in any Arbitration Proceedings or proceedings


before a Sole Expert or in proceedings before any court;


ii) with respect to data, etc., which already through, no fault of the disclosing


Party is in the public domain.


16.6 Any Party disclosing information or providing data to any third party under this


Article shall require such persons to observe the confidentiality of s ’ '



























































Petroleum Agreement, MOE/GNPCA/itol 54


 ARTICLE 17








INSPECTION, SAFETY AND ENVIRONMENTAL PROTECTION


17.1 GNPC shall have the right of access to all sites and offices of Contractor and the right


to inspect all buildings and installations used by Contractor relating to Petroleum


Operations. Such inspections and audits shall take place in consultation with


Contractor and at such times and in such manner as not unduly to interfere with the


normal operations of Contractor.


17.2 Contractor shall take all necessary steps, in accordance with accepted petroleum


industry practice, to perform activities pursuant to the Agreement in a safe manner and


shall comply with all requirements of governing law, including all=applicable labour,


health and safety and environmental laws and regulations in force from time to time.


17.3 Contractor shall provide an effective and safe system for disposal of water and waste


oil, oil base mud and cuttings in accordance with accepted petroleum industry


practice, and shall provide for the safe completion or abandonment of all boreholes


and wells.


17.4 Contractor shall exercise its rights and carry out its responsibilities under this Contract


in accordance with accepted petroleum industry practice, and shall take reasonable


steps in such manner as to:


a) result in minimum ecological damage or destruction;


b) control the flow and prevent the escape or the avoidable waste of Petroleum


discovered in or produced from the Contract Area;


c) prevent damage to Petroleum-bearing strata;


d) prevent the entrance of water through boreholes and wells to Petroleum-bearing


strata, except for the purpose of secondary recovery;


e) prevent damage to onshore lands and to trees, crops, buildings or other structures;


and


f) avoid any actions which would endanger the health or safety of persons.


17.5 If Contractor’s failure to comply with the requirements of Article 17.4 results in the


release of Petroleum or other materials on the seabed, in the sea, on land or in fresh


water, or if Contractor’s operations result in any other form of pollution or otherwise


cause harm to fresh water, marine, plant or animal life, Contractor shall, in accordance


with accepted petroleum industry practice, promptly take all necessary measures to


control the pollution, to clean up Petroleum or other released material, or to repair, to


the maximum extent feasible, damage resulting from any such circumstances. If such


 of subcontract clean-up and repair activities shall be borne by Contractor and shall not


be included as Petroleum Costs under this Agreement.





17.6 Contractor shall notify GNPC immediately in the event of any emergency or major


accident and shall take such action as may be prescribed by GNPC’s emergency


procedures and by accepted petroleum industry practices.


17.7 If Contractor does not act promptly so as to control, clean up or repair any pollution or


damage, GNPC may, after giving Contractor reasonable notice in the circumstances,


take any actions which are necessary, in accordance with accepted petroleum industry


practice and the reasonable costs and expenses of such actions shall be borne by


Contractor and shall, subject to Article 17.5 be included as Petroleu























































































































56


Petroleum Agreement. MOBGNPC/Vilot


 ARTICLE 18








ACCOUNTING AND AUDITING


18.1 Contractor shall maintain, at its offices in Ghana, books of account and supporting


records in the manner required by applicable law and generally=accepted accounting


principles used in the international petroleum industry and shall file reports, tax


returns and any other documents and any other financial returns which are required by


applicable law.


18.2 In addition to the books and reports required by Article 18.1 Contractor shall


maintain, at its office in Ghana, a set of accounts and records relating to Petroleum


Operations under this Agreement. Such accounts shall be kept in accordance with the


requirements of the applicable law and generally accepted accounting principles used


in the petroleum industry.


18.3 The accounts required by Articles 18.1 and 18.2 shall be kept in United States Dollars


or such other currency as GNPC and Contractor may agree.


18.4 Contractor will provide GNPC with quarterly summaries of the Petroleum Costs


incurred under this Agreement.


18.5 GNPC shall review all financial statements submitted by the Contractor as required by


this Agreement, and shall signify its provisional approval or disapproval of such


statements in writing within ninety (90) days of receipt failing which the financial


statements as submitted by Contractor shall be deemed approved by GNPC; in the


event that GNPC indicates its disapproval of any such statement, the Parties shall


meet within fifteen (15) days of Contractor’s receipt of the notice of disapproval to


review the matter.


18.6 Notwithstanding any provisional approval pursuant to Article 18.5 GNPC shall have


the right at its sole expense and upon giving reasonable notice in writing to Contractor


to audit the books and accounts of Contractor relating to Petroleum Operations within


two (2) years from the submission by Contractor of any report of financial statement.


GNPC shall not, in carrying out such audit, interfere unreasonably with the conduct of


Petroleum Operations. Any such audit shall be undertaken by an independent


international auditing firm and shall be completed within nine (9) months after its


commencement. Contractor shall provide all necessary facilities for auditors


appointed hereunder by GNPC including working space and access to all relevant


personnel, records, files and other materials.


If GNPC desires verification of charges from an Affiliate, Contractor shall at GNPC’s


sole expense obtain for GNPC or its representatives an audit certificate to this purpose


from the statutory auditors of the Affiliate concerned. Copies of audit reports shall be


provided to the Contractor and GNPC. Any unresolved audit claim resulting from


such audit, upon which Contractor and GNPC are unable to agree shall be submitted to


the JMC for decision which must be unanimous. In the event that a unanimous


decision is not reached in respect of any audit claim, then such unresolved audit claim


- 57


Petroleum Agreement, MOE/GNPC/Vilol


 shall be submitted for resolution in accordance with Article 24. Subject to any


adjustments resulting from such audits. Contractor's accounts and financial statements


shall be considered to be correct on expiry of a period of two (2) years from the date of


their submission unless before the expiry of such two year period GNPC has notified


Contractor of any exceptions to such accounts and statements.


18.7 Nothing in this Article shall be read or construed as placing a limit on GNPC’s access


to Contractor’s books and accounts in respect of matters arising under Article 23.4 fa).





























































































































Petroleum Agreement, MOE/GNPC/Vitol


 ARTICLE 19








TITLE TO AND CONTROL OF GOODS AND EQUIPMENT


19.1 GNPC shall be the sole and unconditional owner of:


a) Petroleum produced and recovered as a result of Petroleum Operations, except for


such Petroleum as is distributed to the State and to Contractor pursuant to Article


10 or 14 hereof;


b) all physical assets other than those to which Article 19.3 or 19.4 apply, which are


purchased, installed, constructed or used by Contractor in Petroleum Operations


as from the time that:


i) the full cost thereof has been recovered in accordance with the provisions


of the Accounting Guide; or


ii) this Agreement is terminated and Contractor has not disposed of such


assets prior to such tennination,


whichever occurs first.


19.2 Contractor shall have the use of the assets referred to in Article 19.1 (b) for purposes


of its operations under this Agreement without payment provided that Contractor shall


remain liable for maintenance, insurance and other costs associated with such use.


Where Contractor has failed to keep any such asset in good working condition


(normal wear and tear excepted). GNPC shall have the right to recover the cost of


repair or replacement of such assets from Contractor. Contractor shall indemnify


GNPC against all losses, damages, claims or legal action resulting from Contractor’s


use of such assets, if and in as far as such losses, damages, claims or legal actions


were directly caused by Contractor’s Gross Negligence.


19.3 Equipment or any other assets rented or leased by Contractor which is/are imported


into Ghana for use in Petroleum Operations and subsequently re-exported therefrom,


which is of the type customarily leased for such use in accordance with international


petroleum industry practice or which is otherwise not owned by Contractor shall not


be transferred to GNPC. No equipment or assets owned or leased by a Subcontractor


shall by reason of the provisions of this Article 19 be deemed to be transferred to


GNPC.


19.4 All assets acquired by Contractor which are not affected by the provisions of Article


19.1 (b) above may, be used by GNPC for further Petroleum Operations. Where


GNPC requires the use of Contractor’s asset. GNPC shall make a written request to


Contractor and Contractor shall respond to GNPC’s request within thirty (30) days.


Where GNPC is granted the use of Contractor’s asset, GNPC shall be liable to pay a


reasonable and mutually agreed fee for such use, and shall bear the cost of repair or


 and tear excepted), and further provided that Contractor does not require such assets


for its Petroleum Operations.





19.5 Upon the termination of Petroleum Operations in any Area, Contractor shall give


GNPC the option to acquire any movable and immovable assets used for such


Petroleum Operations and not affected by the provisions of Article 19.1 (b) at a


reasonable and mutually agreed price, always provided that Contractor does not


require such assets for Contractor’s Petroleum Operations in the Contract Area.





19.6 All assets which are not affected by Article 19.1 (b) nor subject to Article 19.4 or 19.5


above, and all Subcontractor equipment, may be freely exported by Cqnt^actor 9^ its


Subcontractor, respectively, at its discretion.






































































































































60


Petroleum Agreement, MOE/GNPC/Vitol


 ARTICLE 20








PURCHASING AND PROCUREMENT


20.1 In the acquisition of plant, equipment, services and supplies for Petroleum Operations,


Contractor shall give preference to materials, services and products produced in


Ghana including shipping services provided by vessels owned or controlled by


Ghanaian shipping companies if such materials, services and products can be supplied


at prices, grades, quantities, delivery dates and on other commercial terms equivalent


to or more favourable than those at which such materials, services and products can be


supplied from outside Ghana.





20.2 For the purposes of Article 20.1, price comparisons shall be made on a c.i.f. Accra


delivered basis.


20.3 The acquisition of plant, equipment,


services (including those to be provided by


GNPC pursuant to Article 2.8) and supplies for Petroleum Operations shall be


approved by the JMC.






















































































Petroleum Agreement. MOE/GNPC/Vitol 61





 ARTICLE 21








EMPLOYMENT AND TRAINING


21.1 In order to establish programmes to train Ghanaian personnel for work in Petroleum


Operations and for the transfer of management and technical skills required for the


efficient conduct of Petroleum Operations, Contractor shall pay to GNPC the sum of


four hundred thousand US dollars (US 5400,000) per year from the Effective Date to


maintain and implement such programmes.


21.2 Within the first Contract Year, the Contractor shall pay to GNPC a technology support


payment of one million U.S. dollars (US $1,000,000) or its equivalent in kind. The


Contractor shall have no obligation to make any additional technology support


payment. Expenditures incurred under Article 21.1 above, and this Article 21.2 shall


qualify for deduction against income tax under the Petroleum Income Tax Law and


shall be considered as Petroleum Costs.


21.3 Where qualified Ghanaian personnel are available for employment in the conduct of


Petroleum Operations, Contractor shall ensure that in the engagement of personnel it


shall as far as reasonably possible provide opportunities for the employment of such


personnel. For this purpose, Contractor shall submit to GNPC an employment plan


with number of persons and the required professions and technical capabilities prior to


the performance of Petroleum Operations. GNPC shall provide the qualified


personnel according to the said plan.


21.4 Contractor shall, if so requested by GNPC, provide opportunities for a mutually


agreed number of personnel nominated by GNPC to be seconded for on-the-job


training or attachment in all phases of its Petroleum Operations under a mutually


agreed secondment contract. Such secondment contract shall include continuing


education and short industry courses mutually identified as beneficial to the secondee.


Cost and other expenses connected with such assignment of GNPC personnel shall be


borne by the Contractor and considered as Petroleum Costs.


21.5 Contractor shall regularly provide to GNPC information and data relating to


worldwide petroleum science and technology, petroleum economics and engineering


available to Contractor, and shall assist GNPC personnel to acquire knowledge and


skills in all aspects of the petroleum industry.


21.6 It is agreed that there will be no disclosure or transfer of any documents, data, know¬


how, technology or other information owned or supplied by Contractor, its Affiliates,


or non-Affiliates, to third parties without Contractor’s prior written consent, and then


only upon agreement by the recipients to retain such information in strict confidence.


£2




















Petroleum Agreement, MOE/GNPCA/itol 62





 ARTICLE 22





FORCE MAJEURE


22.1 The failure of a Party to fulfill any term or condition of this Agreement, except for the


payment of monies, shall be excused if and to the extent that such failure arises from


Force Majeure, provided that, if the event is reasonably foreseeable such party shall


have prior thereto taken all appropriate precautions and all reasonable alternative


measures with the objective of carrying out the terms and conditions of this


Agreement. A Party affected by an event of Force Majeure shall promptly give the


other Parties notice of such event and also of the restoration of normal conditions.


22.2 A Party unable by an event of Force Majeure to perform any obligation hereunder


shall take all reasonable measures to remove its inability to fulfill the terms and


conditions of this Agreement with a minimum of delay, and the Parties shall take all


reasonable measures to minimise the consequences of any event of Force Majeure.


22.3 Any period set herein for the completion by a Party of any act required or permitted to


be done hereunder, shall be extended for a period of time equal to that during which


such Party was unable to perform such actions as a result of Force Majeure, together


with such time as may be required for the resumption of Petroleum Operations.


22.4 Except in the case of:


a) a law of general application which is not discriminatory;


b) an action taken in consequence of an emergency arising from a condition of Force


Majeure;





GNPC may not claim Force Majeure in respect of any action if the State


or any agency of the State.





















































63


Petroleum Agreement, MOE/GNPC/Vitol


 ARTICLE 23








TERM AND TERMINATION


23.1 Subject to this Article the term of this Agreement shall be thirty (30) years


commencing from the Effective Date.


23.2 At the end of the term provided for in Article 23.1, provided that this Agreement has


not been terminated earlier, the Parties may negotiate concerning the terms and


conditions of a further agreement with respect to the Contract Area or any part thereof,


but no failure to enter any such further agreement shall give rise to arbitration


pursuant to Article 24 hereof.


23.3 Subject to Article 22, Termination of this Agreement shall result upon the occurrence


of any of the following:


a) the failure of Contractor through any cause other than Force Majeure, to


commence Exploration Operations sixty (60) days after the Effective Date,


pursuant to Article 4.1;


b) the relinquishment or surrender of the entire Contract Area;


c) the termination of the Exploration Period including extensions pursuant to Article


3 without notification by Contractor of commerciality pursuant to Article 8 in


respect of a Discovery of Petroleum in the Contract Area, provided however


Termination shall not occur while Contractor has the right to evaluate a


Discovery for appraisal or commerciality and/or propose a Development Plan


pursuant to Articles 8 or 14, or once a Development Plan has been approved, nor


when the provisions of Articles 8.13 through 8.19 are applicable;


d) if, following a notice that a Discovery is commercial the Exploration Period


terminates under Article 3 without a Development Plan being approved, provided


however that Termination shall not occur when the provisions of Articles 8.13


through 8.19 are applicable;


e) the failure of Contractor through any cause other than Force Majeure, to


commence preparations with respect to Development Operations pursuant to


Article 8.11; or


23.4 Subject to Article 22 and pursuant to procedures described in Article 23.5 below


GNPC and/or the State may terminate this Agreement upon the uncorrected


occurrence of any of the events (or failures to act listed) below:


a) the submission by Contractor to GNPC of a written statement which Contractor


knows or should have known to be false, in a material particular; provided that in


the event of intent on the part of Contractor to cause serious damage to GNPC or


b) the assignment or purported assignment by Contractor of this Agreement contrary


to the provisions of Article 25 hereof;


c) the insolvency or bankruptcy of Contractor, the entry by Contractor into any


agreements or composition with its creditors, taking advantage of any law for the


benefit of debtors or Contractor's entry into liquidation, or receivership, whether


compulsory or voluntary, and there is thereby justifiable anticipation that the


obligations of Contractor hereunder will not be performed;


d) the intentional extraction by Contractor of any material of potential economic


value other than as authorised under this Agreement, or any applicable law except


for such extraction as may be unavoidable as a result of Petroleum Operations


conducted in accordance with accepted petroleum industry practice;


e) failure by Contractor:


i) to fulfill its minimum work obligations pursuant to Article 4.3; save


where the Minister has waived the default; or


ii) to carry out an approved Appraisal Programme undertaken by


Contractor pursuant to Article 8, unless Contractor notifies GNPC and


the Minister that the Appraisal Programme should be amended and


submits said amendment to the JMC for its review;


f) substantial and material failure by Contractor to comply with any of its obligations


pursuant to Article 7.1 hereof;


g) failure by Contractor to make any payment of any sum which is due to GNPC or


the State pursuant to this Agreement within thirty (30) days after receiving notice


that such payment is due; or


h) failure by Contractor to comply with any decisions reached as a result of any


arbitration proceedings conducted pursuant to Article 24 hereof.


23.5 If GNPC and/or the State believe an event or failure to act as described in Article 23.4


above has occurred, a written notice shall be given to Contractor describing the event


or failure. Contractor shall have thirty (30) days from receipt of said notice to


commence and pursue remedy of the event or failure cited in the notice. If after said


thirty (30) days Contractor has failed to commence appropriate remedial action,


GNPC and/or the State may then issue a written notice of Termination to Contractor


which shall become effective thirty (30) days from receipt of said notice by Contractor


unless Contractor has referred the matter to arbitration. In the event that Contractor


disputes whether an event specified in Article 23.3 or Article 23.4 has occurred or


been remedied. Contractor may, any time up to the effective date of any notice of


Termination refer the dispute to arbitration pursuant to Article 24 hereof. If so


referred, GNPC and/or the State may not terminate this Agreement in respect of such


event except in accordance with the terms of any resulting arbitratio














Petroleum Agreement. MOE/GNPGYitol 65





 23.6 Upon Termination of this Agreement, all rights of Contractor hereunder shall cease,


except for such rights as may at such time have accrued, and without prejudice to any


obligation or liability imposed or incurred under this Agreement prior to Termination


and to such rights and obligations as the Parties may have under applicable law.





23.7 Upon Termination of this Agreement or in the event of an assignment of all the rights


of Contractor, all wells and associated facilities shall be left in a state


accordance with accepted petroleum industry practice.





























































































































66


Petroleum Agreement, MOE/GNPC/Vitol


 ARTICLE 24








CONSULTATION. ARBITRATION AND INDEPENDENT EXPERT


24.1 Except in the cases specified in Article 26.4 any dispute or difference arising between


the State and GNPC or either of them on one hand and Contractor on the other hand in


relation to or in connection with or arising out of any terms and conditions of this


Agreement shall be resolved by consultation and negotiation. In the event that no


agreement is reached within thirty (30) days after the date when either Party notifies


the other that a dispute or difference exists within the meaning of this Article or such


longer period specifically agreed to by the Parties, any Party shall have the right


subject to Article 24.8 to have such dispute or difference settled through international


arbitration under the auspices of the Arbitration Institute of the Stockholm Chamber


of Commerce, Stockholm, Sweden.


24.2 The tribunal shall consist of three (3) arbitrators. Each Party to the dispute shall


appoint one (1) arbitrator and those so appointed shall designate an umpire arbitrator.


If a Party's arbitrator and/or the umpire arbitrator is not appointed within the periods


provided in the rules referred to in Article 24.5 below, such Party's arbitrator and/or


the umpire arbitrator shall at the request of any Party to the dispute be appointed by


the Arbitration Institute of the Stockholm Chamber of Commerce.


24.3 No arbitrator shall be a citizen of the home country of any Party hereto, and shall not


have any economic interest or relationship with any such Party.


24.4 The arbitration proceedings shall be conducted in Stockholm, Sweden, or at such


other location as selected by the arbitrators unanimously. The proceedings shall be


conducted in the English language.


24.5 The arbitration tribunal shall conduct the arbitration in accordance with the arbitration


rules of the United Nations Commission on International Trade Law ("UNCITRAL")


of December 15, 1976, except as provided in this Article. For purposes of Article


33.1 of said UNCITRAL rules, the arbitration tribunal shall apply the governing law


and the provisions of this Agreement in determining the dispute.


24.6 If the opinions of the arbitrators are divided on issues put before the tribunal, the


decision of the majority of the arbitrators shall be determinative. The award of the


tribunal shall be final and binding upon the Parties.


24.7 The right to arbitrate disputes arising out of this Agreement shall survive the


termination of this Agreement.


24.8 In lieu of resorting to arbitration, the Parties to a dispute arising under this Agreement,


including the Accounting Guide, may by mutual agreement refer=the dispute for


determination to a Sole Expert to be appointed by the Parties. In such case, the Parties


shall agree on the relevant qualifications of the Sole Expert, the terms of reference for


such proceeding, the schedule of presentation of evidence and testimony of witnesses,


and other procedural matters. The decision of the Sole Expert shall b final and








Petroleum Agreement, MOE/GNPC/Vitol 67





binding upon the Parties. The Sole Expert shall have ninety (90) days after his


appointment to decide the case, subject to any extensions mutually agreed to by the


Parties to the dispute. Upon failure of the Sole Expert to decide the matter within the


ninety (90) day period (or any extension thereof), any Party may call for arbitration


under Article 24.1 above.





24.9 Each Party to a dispute shall pay its own counsel and other costs; however, costs of


the arbitration tribunal shall be allocated in accordance with the decision of the


tribunal. The costs and fees of the Sole Expert shall be borne equally by


the dispute.























































































































Petroleum Agreement. MOE/GNPCA/itot 68


 ARTICLE 25





ASSIGNMENT


25.1 This Agreement shall not be assigned by Contractor directly or indirectly in whole or


in part, without the prior written consent of GNPC, and the Minister, which consent


shall not be unreasonably withheld or delayed. GNPC and/or the Minister may impose


reasonable conditions upon the giving of consent under this Article.


25.2 Any assignment of this Agreement shall bind the assignee as a Party to this


Agreement to all the terms and conditions hereof unless otherwise agreed and as a


condition to any assignment Contractor shall provide an unconditional undertaking by


the assignee to assume all obligations assigned by Contractor under this Agreement.


25.3 Where in consequence of an assignment hereunder Contractor is more than one


person:


a) any agreement made between the persons who now constitute Contractor relating


to the Petroleum Operations hereunder shall be disclosed to GNPC and the


Minister and it shall not be inconsistent with the provisions of this Agreement;


b) an operating agreement shall be established by the JMC to regulate the conduct of


Petroleum Operations thereafter, including cash-calls and the limits of authority;


c) no change in the scope of the operations may take place without the prior


approval in writing of GNPC, which approval shall not be unreasonably delayed


or withheld; and


d) the duties and obligations of Contractor hereunder shall be joint and several


except those relating to the payment of income tax pursuant to Article 12 which


shall be the several obligation of each such person.


25.4 GNPC's acquisition of Additional Interest under Article 2 or a Sole Risk interest


pursuant to Article 9 shall not be deemed to be an assignment within Df


this Article.






































Petroleum Agreement, MOE/GNPC/Vitol 69


 ARTICLE 26








MISCELLANEOUS


26.1 This Agreement and the relationship between the State and GNPC on one hand and


Contractor on the other shall be governed by and construed in accordance with the


laws of the Republic of Ghana consistent with such rules of international law as may


be applicable, including rules and principles as have been applied by international


tribunals.


26.2 The State, its departments and agencies, shall support this Agreement and shall take


no action which prevents or impedes the due exercise and performance of rights and


obligations of the Parties hereunder. As of the Effective Date of this Agreement and


throughout its term, the State guarantees Contractor the stability of the terms and


conditions of this Agreement as well as the fiscal and contractual framework hereof


specifically including those terms and conditions and that framework that are based


upon or subject to the provisions of the laws and regulations of Ghana (and any


interpretations thereof) including, without limitation, the Petroleum Income Tax Law,


the Petroleum Law, the GNPC Law and those other laws, regulations and decrees that


are applicable hereto. This Agreement and the rights and obligations specified herein


may not be modified, amended, altered or supplemented except upon the execution


and delivery of a written agreement executed by the Parties. Any legislative or


administrative act of the State or any of its agencies or subdivisions which purports to


vary any such right or obligation shall, to the extent sought to be applied to this


Agreement constitute a breach of this Agreement by the State.


26.3 Where a Party considers that a significant change in the circumstances prevailing at


the time the Agreement was entered into, has occurred affecting the economic balance


of the Agreement, the Party affected hereby shall notify the other Parties in writing of


the claimed change with a statement of how the claimed change has affected the


relations between the Parties.


26.4 The other Parties shall indicate in writing their reaction to such notificationjeferred to


in Clause 26.3 within a period of three (3) months of receipt of such notification and if


such significant changes are established by the Parties to have occurred, the Parties


shall meet to engage in negotiations and shall effect such changes in, or rectification


of, these provisions as they may agree are necessary.


26.5 No waiver by any Party of any of its rights hereunder shall be construed or implied,


but a waiver shall be binding on such Party only if it is made specifically, expressly


and in writing.


26.6 Except for payment obligations arising under the Petroleum Income Tax Law, any


Party failing to pay any amounts payable by it under this Agreement (including the


provisions of Annex 2) on the respective dates on which such amounts are payable by


such Party hereunder shall be obligated to pay interest on such unpaid amounts to the


Party to which such amounts are payable. The rate of such interest with respect to


each day of delay during the period of such nonpayment shall be the ' ie











Petroleum Agreement. MOE/GNPC/Vitol 70





Bank of England, London, certifies to be the London Interbank offered rate (LIBOR)


in the London Interbank Eurodollar market on thirty (30) day deposits, in effect on the


last business day of the respective preceding Month, plus three percent (3%). Such


interest shall accrue from the respective dates such amounts are payable until the


amounts are duly paid. The Party to whom any such amount is payable may give


notice of nonpayment to the Party in default and if such amount is not paid within


fifteen (15) days after such notice, the Party to which the amount is owed may, in


addition to the interest referred to above, seek remedies available pursuant to Article


24.


26.7 a) Tire rights and obligations under this Agreement of the State and GNPC on the


one hand and Contractor on the other shall be separate and proportional and not


joint. This Agreement shall not be construed as creating a partnership or joint


venture, nor an association or trust (under any law' other than the Petroleum Law),


or as authorising any Party to act as agent, servant or employee for any other Party


for any purpose whatsoever except as provided in Article 10.3;


b) The duties and obligations of each Party constituting Contractor hereunder shall


be joint and several and it is recognised that each such Party shall own and be


responsible for its undivided interest in the rights and obligations of Contractor


hereunder; provided, however, that the following payments shall be the separate


obligation of and shall be made by each Party which constitutes the Contractor:


i) Payments under the Petroleum Income Tax Law;


ii) Payments of royalty taken in cash under the provisions of Article 10.1(a);


and


iii) AOE share under the provisions of Article 10.1 (b).


26.8 This Agreement shall not take effect unless and until it has been executed by the


Parties and has been ratified by the Parliament of Ghana whichever occurs later (the


Effective Date). If this Agreement is not ratified within six (6) months of the


execution of the Agreement by the Parties, then Contractor shall have the right to


withdraw from this Agreement at any time thereafter, and, upon such withdrawal, all


rights and obligations of all Parties hereunder shall cease and terminate./


K









































Petroleum Agreement, MOE/GNPC/Vitol 71





 ARTICLE 27











NOTICE





27.1 Any notice, application, request, agreement, consent, approval, instruction, delegation,


waiver or other communication required or permitted to be given hereunder shall be in


writing addressed and marked for the attention of the State, GNPC or the Contractor


as appropriate, and must be left at the address of the addressee or sent by facsimile or


by an appropriate electronic means to the addressee specified below:








FOR THE STATE:


MINISTER OF ENERGY





MINISTRY OF ENERGY


PRIVATE MAIL BAG


MINISTRY POST OFFICE


ACCRA, GHANA


Telephone: 233 21 667151 - 3





Telefax: 233 21 668262





FOR GHANA NA TIONAL PETROLEUM CORPORA TION:





THE MANAGING DIRECTOR


GHANA NATIONAL PETROLEUM CORPORATION


PETROLEUM HOUSE


HARBOUR ROAD


PRIVATE MAIL BAG


TEMA


GHANA


Telephone: 233-22-204726





Telefax: 233-22-202854












































Petroleum Agreement, MOE/GNPC/Vitol 72





 FOR CONTRACTOR:





THE MANAGING DIRECTOR


VITOL UPSTREAM GHANA LIMITED


NO. 21, AVIATION ROAD


P. O. BOX 30414


K1A, ACCRA


GHANA





Telephone: 233-21-781124/5


Fax: 233-21-785689/781126


27.2 Any communication referred to in Article 27.1 shall take effect from the time it is





received. A notice is deemed to be received upon acknowledgement of receipt by the


recipient. A notice sent by facsimile is deemed to be received upon production of a


transmission report from the machine from which the facsimile was sent in its entirety to


the recipient’s facsimile number, and the recipient confirms such receipt.








IN WITNESS WHEREOF the Parties have caused this Agreement to be executed by their


duly authorized representatives as of the date first written above.








FOR THE STATE Witnessed:





By *








Its -fefrPtlM


* c





FOR GHANA NATIONAL PETROLEUM


CORPORATION








AAQIt? SETfL


Its Pr>Pn^\CM,-Nj^ ^




FOR CONTRACTOR


VITOL UPSTREAM GHANA LIMITED Witnessed:














Its CaV rJT^














Petroleum Agreement, MOE/GNPCA/itol 73


 ANNEX 1








CONTRACT AREA








The Contract Area of 740 square kilometres shall be the area described by the following


coordinates:


 ANNEX 2








ACCOUNTING GUIDE


The purpose of this Accounting Guide is to establish equitable methods as between the


Parties for determining charges and credits applicable to operations under the Agreement.


Principles established by this Accounting Guide shall truly reflect the Contractor’s actual cost.


$ ^


































































































0944v2_


Petroleum Agreement, MOE/GNPC/Vitol ■ Annexes


 SECTION 1








1.1 GENERAL PROVISIONS


1.1.1 Words and terms appearing in this Annex shall have the same meaning as in


the Agreement and to that end shall be defined in accordance with Article 1


of the Agreement.


1.1.2 This Annex may be amended by a unanimous decision of the JMC.


1.1.3 In the event of a conflict between the provisions of the Accounting Guide and


the provisions of the Agreement, the provisions of the Agreement shall


prevail.


1.2 STATEMENTS REQUIRED TO BE SUBMITTED BY CONTRACTOR





1.2.1 Within sixty (60) days from the Effective Date, Contractor shall propose to


GNPC an outline of the chart of accounts, operating records and reports to be


prepared and maintained, which shall describe the basis of the accounting


principles and procedures to be used during the term of the Agreement, and


shall be consistent with normal practice of the international petroleum


industry.


1.2.2 Within ninety (90) days of the receipt of such proposal GNPC shall either


accept it or request such revisions as GNPC deems necessary. Failure to


notify Contractor of any requested revisions within a ninety (90) day period


of receipt of such proposal shall be deemed acceptance of such proposal.


1.2.3 Within one hundred and eighty (180) days from the Effective Date, the


Parties shall either agree on such outline or submit any outstanding issue for


determination by a Sole Expert pursuant to the provisions of Article 24.


1.2.4 Following agreement over the outline Contractor shall prepare and submit to


GNPC formal copies of the chart of accounts relating to the accounting,


recording and reporting functions listed in such outline. Contractor shall also


permit GNPC to inspect its manuals and to review all procedures which are


to be followed under the Agreement.


1.2.5 Without prejudice to the generality of the foregoing. Contractor shall make


separate statements relating to Petroleum Operations for each Development


and Production Area as follows:





a) Cash Call Statement (see Section 5)


b) Production Statement (see Section 6)


c) Value of Production Statement (see Section 7)


d) Cost Statement (see Section 8)


e) Statement of Expenditures and Receipts (see Sect








_0944v2_ 3


Petroleum Agreement, MOE'GNPCA/itol - Annexes


f) Final End-of-Year Statement (see Section 10)


g) Budget Statement (see Section 11)


h) Long Range Plan and Forecast (see Section 12)


1.3 LANGUAGE, MEASUREMENT. AND UNITS OF ACCOUNTS


1.3.1 The U.S. Dollar being the currency unit for investments and compensation


hereunder shall therefore be the unit of currency for all bookkeeping and


reporting under the Agreement. When transactions for an asset or liability are


in Ghana Cedis or currency other than the U.S. Dollar, the respective accounts


shall be kept in such other currency as well as the U.S. Dollar.


1.3.2 Measurement required under this Annex shall be in the metric system and


Barrels.


1.3.3 The English language shall be employed.


1.3.4 Where necessary for purposes of clarification, Contractor may also prepare


financial reports in other languages, units of measurement and currencies


1.3.5 It is the intent of the Parties that no Party shall experience any gain or loss at


the expense of or to the benefit of the other as a result of exchange of currency.


Where any such gain or loss arises it shall be charged or credited to the


accounts under the Agreement.


1.3.6 The rate of exchange for the conversion of currency shall be the rate quoted by


the Bank of Ghana, or, where buying and selling rates are quoted, the


arithmetic average of those rates, at a close of business on the


currency conversion.





















































_Q944v2_


Petroleum Agreement, MOE/GNPCA/itot - Annexes


 1.3.7 Current assets and liabilities shall be translated at the rate prevailing on the


date of settlement of the account.


1.3.8 To translate revenue received and expenditures made in Ghana Cedis or in


U.S. Dollars, the average of the monthly rate between the currencies shall be


used.


1.3.9 Expenditures made in Ghana Cedis or in U.S. Dollars in respect of capital


items shall be translated at the rate prevailing at the date of acqi'








































































































_0944v2_ 5


Petroleum Agreement, MOBGNPC/Vitol - Annexes


 SECTION 2








2.0 CLASSIFICATION AND ALLOTMENT OF COSTS AND EXPENDITURE


2.1 All expenditure relating to Petroleum Operations shall be classified, as follows:


a) Exploration Expenditure;


b) Development Expenditure;


c) Production Expenditure;


d) Service Costs; and


e) General and Administrative expenses


and shall be defined and allotted as herein below provided.


2.2 EXPLORATION EXPENDITURE


Exploration Expenditure shall consist of all direct, indirect and allotted costs incurred


in the search for Petroleum in the Contract Area, including but not limited to


expenditure on:


a) aerial, geographical, geochemical, paleontological, geological, topographical


and seismic surveys, and studies and their interpretation;


b) borehole drilling and water drilling;


c) labour, materials and services used in drilling wells with the objective of


finding new Petroleum reservoirs or for the purpose of appraising Petroleum


reservoirs already discovered, provided such wells are not completed as


producing wells;


d) facilities used solely for Exploration Operations, including access roads, where


applicable, and purchased geological and geophysical information;


e) all service costs allotted to the Exploration Operations on an equitable basis;


0 all General and Administrative Expenses allotted to Exploration Operations


based on the percentage share of projected budget expenditure which will be


adjusted to actual expenditure at the end of each year.


2.3 DEVELOPMENT EXPENDITURE





Development Expenditure shall consist of all expenditure incurred in Development


Operations, including but not limited to expenditure on: / \ -r-jA














___0944v2_


Petroleum Agreement. MOE/GNPC/Vitol • Annexes


a) drilling wells which are completed as producing wells and drilling wells for


purposes of producing a Petroleum reservoir already discovered, whether these


wells are dry or producing;


b) completing wells by way of installation of casing or equipment or otherwise


after a well has been drilled for the purpose of bringing such well into use as a


producing well;


c) intangible drilling costs such as labour, consumable material and services


having no salvage value which are incurred in drilling and deepening of wells


for producing purposes;


d) field facilities such as pipelines, flow lines, production and treatment units,


wellhead equipment, subsurface equipment, enhanced recovery systems,


offshore platforms. Petroleum storage facilities and access roads for


production activities;


e) engineering and design studies for field facilities;


f) all service costs allotted to Development Operations on an equitable basis;


g) all General and Administrative Expenses allotted to Development Operations


based on the percentage projected budget expenditure which will be adjusted


to actual expenditure as the end of the year.


2.4 PRODUCTION EXPENDITURE





Production Expenditure shall consist of but not limited to all expenditure incurred in


Petroleum Operations after the Date of Commencement of Commercial Production,


such expenditure being other than Exploration Expenditure, Development


Expenditure, General and Administrative Expenses and Service Costs. The balance of


General and Administrative Expenses and Service Costs not allotted to Exploration


Operations or to Development Operations under Section 2.2 and 2.


to Production Expenditure.















































_0944v2__


Petroleum Agreement MOE/GNPC/Vitol - Annexes


2.5 SERVICE COSTS





2.5.1 Service Costs shall consist of but not be limited to all direct and indirect


expenditure incurred in support of Petroleum Operations, including the


construction or installation of warehouses, piers, marine vessels, vehicles,


motorised rolling equipment, aircraft, fire security stations, workshops, water


and sewerage plants, power plants, housing community and recreational


facilities and furniture, tools land, equipment used in such construction or


installation.


Service Costs in any Calendar Year shall include the total costs incurred in


such year to purchase and construct or install such facilities as well as the


annual costs of maintaining and operating such facilities.


2.5.2 All Service Costs will be regularly allotted on an equitable basis to


Exploration Expenditure. Development Expenditure and Production


Expenditure.


2.6 GENERAL AND ADMINISTRATIVE EXPENSES





General and Administrative Expenses shall consist of:


2.6.1 All main office, field and general administrative costs, in the Republic of


Ghana, including but not limited to supervisory, accounting and employee


relations services:


2.6.2 An overhead charge of 1.5% of the actual cost of sendees rendered outside the





Republic of Ghana by Contractor and its Affiliates for managing Petroleum


Operations and for staff advice and assistance, including but not limited to


financial, legal, accounting and employee relations services.





2.6.3 All general and administrative expenses will be regularly allotted as specified


in subsections 2.2 (f), 2.3 (g) and 2.4 to Exploration Expenditure,


Development Expenditure and Production Expenditure.//^r









































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Petroleum Agreement, MOE/GNPCA/itol - Annexes


 SECTION 3








3.0 COSTS, EXPENSES. EXPENDITURES AND CREDITS OF CONTRACTOR


3.1 Contractor for the purpose of this Agreement shall charge the following allowable


costs to the accounts.


a) costs of acquiring surface rights;


b) labour and associated costs;


c) transportation costs;


d) charges for services;


e) material costs;


f) rentals, duties and other assessments;


g) insurance and losses;


h) legal expenses;


i) training expenses and the technology support payment;


j) general and administrative expenses;


k) utility costs;


l) office facility charges;


m) communication charges;


n) ecological and environmental charges;


o) abandonment cost;


p) pre-Agreement costs of US $200,000: and


q) such other costs necessary for the Petroleum Operations.


3.2 COST OF ACQUIRING SURFACE RIGHTS AND RELINQUISHMENT


Cost of acquiring surface rights shall consist of all direct costs attributable to the


acquisition, renewal or relinquishment of surface rights acquired and maintained in


force over the Contract Area.


3.3 LABOUR AND ASSOCIATED LABOUR COSTS





Labour and associated labour costs shall include but not be limited to:





a) gross salaries and wages including bonuses of those employees of Contractor


and of its Affiliates engaged in Petroleum Operations who are permanently or


temporarily assigned to Ghana;





b) costs regarding holidays, vacation, sickness and disability payments applicable


to the salaries and wages chargeable under (a);





c) expenses or contributions made pursuant to assessments or obligations


imposed under the laws of the Republic of Ghana whicjj a^e applicable to cost


of salaries and wages chargeable under (a);

















_0944v2_


Petroleum Agreement, MOE/GNPC/Vitol - Annexes


d) cost of established plans for employees’ life insurance, hospitalisation,


pensions and other benefits of a like nature customarily granted to employees;


and


e) reasonable travel and personal expenses of employees and families, including


those made for travel and relocation of the personnel, all of which shall be in


accordance with usual practice of the Contractor.


3.4 TRANSPORTATION COSTS





Transportation costs and other related costs of transportation of employees,


equipment, materials and supplies necessary for the conduct of Petroleum Operations.





3.5 CHARGES FOR SERVICES





3.5.1 Charges for sendees shall include:





a) the costs of third party contracts which are the actual costs of contracts for


technical and other services entered into by Contractor for Petroleum


Operations made with third parties other than Affiliates of Contractor,


provided that the prices paid by Contractor are no higher than the


prevailing rates for such services in the world market;





b) technical and other services of personnel assigned by the Contractor and its


Affiliates when performing management, engineering, geological,


geophysical, administrative, legal, accounting, treasury, tax, employee


relations, computer services, purchasing, and all other functions for the


direct benefit of Petroleum Operations; and


c) general services, including, but not without limitation, professional





consultants and others who perform services for the direct benefits of


Petroleum Operations.





3.5.2 Services furnished by Contractor and its Affiliates shall be charged at rates


commensurate with those currently prevailing for such services in the world


marked.















































_0944v2_


Petroleum Agreement. MOE/GNPC/Vilol - Annexes


3.6 RENTALS. DUTIES AND OTHER ASSESSMENTS





All rentals, taxes, duties, levies, charges, fees, contributions and any other assessments


and charges levied by the Government in connection with Petroleum Operations or


paid for the benefit of Petroleum Operations, with the exception of the income tax


specified in the Article 12.2 (iii).


3.7 INSURANCE AND LOSSES





a) insurance is wholly or partly placed with an Affiliate of Contractor, such


premia and costs shall be recoverable only to the extent not in excess of those


generally charged by competitive insurance companies other than Affiliate;


b) costs and losses incurred as a consequence of events, which are, insofar as not


made good by insurance, allowable under 17 of the Agreement; and


c) costs or expenses necessary for the repair or replacement of property resulting


from damage or losses incurred.


3.8 LEGAL EXPENSES





All costs and expenses of litigation and legal or related services necessary or


expedient for the procuring, perfecting, retaining and protecting the rights hereunder


and in defending or prosecuting lawsuits involving the Contract Area or any third


party claim arising out of activities under the Agreement, or sums paid in respect of


legal services necessary or expedient for the protection of the joint interest of GNPC


and Contractor, provided that where legal services are rendered in such matters by


salaried or regularly retained lawyers of Contractor or an Affiliate of Contractor, such


compensation will be included instead under either Section 3.3 or 3.5, as applicable.


3.9 TRAINING COSTS AND THE TECHNOLOGY SUPPORT PAYMENT


All costs and expenses incurred by Contractor in training of its employees and





nominees of GNPC to the extent that such training is attributable to Petroleum


Operations under the Agreement and the payment by Contractor of the technology


support payment.


3.10 GENERAL AND ADMINISTRATIVE EXPENSES





General and Administrative Expenses shall consist of the costs described in


Subsection 2.6.1 and the charge described in Subsection 2.6.2.


3.11 UTILITY COSTS





Any water, electricity, heating, fuel or other energy and utility costs used and


consumed for the Petroleum Operations.


3.12 OFFICE FACILITY CHARGES








_0944v2___ 11


Petroleum Agreement. MOE/GNPCA/itol - Annexes


The cost and expenses of constructing, establishing, maintaining and operating


offices, camps, housing and any other facilities necessary to the conduct of Petroleum


Operations. The cost of constructing or otherwise establishing any operating facility


which may be used at any time in operations of more than one field shall be charged


initially to the field or fields for which the facility is first used. Costs incurred,


thereafter shall be allocated in a reasonable manner, consistent with international


accounting practice, to the fields for which the facility is used.


3.13 COMMUNICATION CHARGES





The costs of acquiring, leasing, installing, operating, repairing and maintaining


communication systems, including radio and microwave facilities.


3.14 ECOLOGICAL AND ENVIRONMENTAL CHARGES





All charges for environmental protection and safety measures conducted in the


Contract Area in accordance with Article 17 of the Agreement.


3.15 ABANDONMENT COST


Cost relating to the decommissioning and abandonment of operations and facilities,





site restoration and other associated operations accrued from a reasonable date in


advance based on estimate of such cost.





3.16 OTHER COSTS


Any other costs not covered or dealt with in the foregoing provisions which are


incurred and not mentioned in Section 3.16 for the necessary and proper conduct of


Petroleum Operations.


3.17 COSTS NOT ALLOWABLE UNDER THE AGREEMENT





The following costs shall not be allowable under the Agreement:


a) commission paid to intermediaries by Contractor;





b) charitable donations and contributions, except where prior approval has been


obtained from GNPC:





c) interest incurred on loans raised by the Contractor;





d) petroleum marketing costs or costs of transporting petroleum beyond the


delivery point;





e) the costs of any bank guarantee under the Agreement and any other amounts


spent on indemnities with regard to nonfulfilment of contractua











_0944v2_ 12


Petroleum Agreement, MOE/GNPC/Vitol - Annexes


f) premium paid as a result of GNPC exercising a Sole Risk option under Article


9 of this Agreement;


g) cost of arbitration under Article 24 of the Agreement or dispute settlement by


any independent expert under the terms of the Agreement;


h) fines and penalties imposed by a competent Court of Law except where such


fines or penalties relate to acts not caused by Contractor’s Gross Negligence;


and


i) costs incurred as a result of Gross Negligence chargeable to Contractor or the


Operator under the terms of the Agreement.


3.18 ALLOWABLE AND DEDUCTIBILITY


The costs and expenses set forth herein shall be for the purpose of determining


allowable or non-allowable costs and expenses only and shall have no bearing on


Contractor’s eligibility or otherwise for deductions in computing Contractor’s net


income from Petroleum Operations for income tax purposes under the Agreement.


3.19 CREDITS UNDER THE AGREEMENT





The net proceeds of the following transactions will be credited to the accounts under


the Agreement:


a) the net proceeds of any insurance or claim in connection with Petroleum


Operations or any assets charged to the accounts under the Agreements when


such operations or assets were insured and the premia charged to the accounts


under the Agreement;





b) revenue received from third parties for the use of property or assets charged to


the accounts under this Agreement;


c) any adjustment from the suppliers or manufacturers or their agents in


connection with a defective equipment or material the cost of which was


previously charged to the account under the Agreement;


d) the proceeds received for inventory materials previously charged to the


account under the Agreement and subsequently exported from the Republic of


Ghana or transferred or sold to third parties without being used in the


Petroleum Operations;





e) rentals , refunds or other credits received which apply to any charge which has


been made to the account under the Agreement, but excluding any award


granted under arbitration or Sole Expert proceedings;


f) the proceeds from the sale or exchange of plant or facilities from the

















Petroleum Agreement, MOE/GNPCA/itol • Annexes


which have been deducted in the computation of FAn, SAn, TAn and ZAn for


tine relevant Development and Production Area;


g) the proceeds derived from the sale or issue of any intellectual property the





development costs of which were incurred pursuant to this Agreement; and


h) the proceeds from the sale of any petroleum information derived from


Petroleum Operations under this Agreement.


3.20 DUPLICATION OF CHARGES AND CREDITS





Notwithstanding any provision to the contrary in this Annex, it is the intention that


there shall be no duplication of charges or credits in the accounts undes the


Agreement.




























































































_0944v2_ 14


Petroleum Agreement, MOE/GNPCA/itol * Annexes


 SECTION 4








4.0 MATERIAL


4.1 VALUE OF MATERIAL CHARGED TO THE ACCOUNTS UNDER


THE AGREEMENT


Material purchased, leased or rented by Contractor for use in Petroleum Operations


shall be valued at the actual net cost incurred by Contractor. The net cost shall


include invoice price less trade and cash discounts, if any, purchase and procurement


fees plus freight and forwarding charges between point of supply and point of


shipment, freight to port of destination, insurance, taxes, customs duties, consular


fees, other items chargeable against imported material, and any other related costs


actually paid.


4.2 VALUE OF MATERIAL PURCHASED FROM AN AFFILIATE


Contractor shall notify GNPC of any goods supplied by an Affiliate of Contractor.


Materials purchased from Affiliate of Contractor shall be charged at the prices


specified in Sections 4.2.1,4.2.2 and 4.2.3.


New Material (Condition “A”)


4.2.1


New material shall be classified as Condition “A”. Such material shall be





valued at the prevailing market price, plus expenses incurred in procuring such


new materials, and in moving such materials to the locations where the


material shall be used.


4.2.2 Used Material (Condition “B”)


Used material shall be classified as Condition “B” provided that it is in sound





and serviceable condition and is suitable for reuse without reconditioning.


Such material shall be valued at not more than seventy five percent (75%) of


the current price of new material valued according to Section 4.2.1 above.


4.2.3 Used Material (Condition “C”)





Used material which is serviceable for original function as good second hand


material after reconditioning and cannot be classified as Condition “B” shall


be classified as Condition “C”. Such material shall be valued at not more than


fifty percent (50%) of the current price of new material valued according to


Section 4.2.1 above. The cost of reconditioning shall be charged to the


reconditioned material provided that that the value of such Condition “C”


material plus the cost of reconditioning does not exceed the


“B” material.








4.3 CLASSIFICATION OF MATERIALS








_0944v2____


Petroleum Agreement, MOE/GNPCMtol - Annexes


Material costs shall be charged to the respective Exploration Expenditure,


Development Expenditure, Operating Expenditure accounts at the time the material is


acquired and on the basis of the intended use of the material. Should such material


subsequently be used other than as intended, the relevant charge will be transferred to


the appropriate account.


4.4 DISPOSAL OF MATERIALS


Sales of property shall be recorded at the net amount collected by the Contractor from


the purchaser.


4.5 WARRANTY OF MATERIALS


In the case of defective material or equipment, any adjustment received by Contractor


from the suppliers or manufacturers of such materials or their agents will be credited to


the accounts under the Agreement.


4.6 CONTROLLABLE MATERIALS


4.6.1 The Contractor shall control the acquisition, location, storage and disposition


of materials which are subject to accounting record control, physical inventory


and adjustment for overages and shortages (hereinafter referred to as


Controllable Material).





4.6.2 Unless additional inventories are scheduled by the JMC, Contractor shall


conduct one physical inventory of the Controllable Material each Calendar


Year which shall be completed prior to the end of the year. The Contractor


shall conduct said inventory on a date to be approved by the JMC. Failure on


the part of GNPC to participate in a JMC schedule or approved physical


inventory shall be regarded as approval of the results of the physical inventory


as conducted by the Contractor.





4.6.3 The gain or loss resulting from the physical inventory shall be reflected in the


stock records of Controllable Materials. The Contractor shall compile a


reconciliation of the inventory with a reasonable explanation for such gains or


losses. Failure on the part of GNPC to object to Contractor’s reconciliation


within thirty (30) days of compilation of said reconciliation shall^be regarded


as approval by GNPC.
































0944v2


Petroleum Agreement, MOE/GNPC/Vitol • Annexes


 SECTION 5








5.0 CASH CALL STATEMENT


5.1 Contractor shall at least fifteen (15) days prior to the commencement of any Month


submit a Cash Call Statement to GNPC in respect of:


i) the Additional Interests Costs to be paid by GNPC; and


ii) costs relating to Sole Risk operations where Contractor conducts Sole Risk


operations for GNPC’s account.


Such Cash Call Statement shall include the following information:


a) due date;


b) payment instructions;


c) the balance prior to the Cash Call being issued;


d) amount of US Dollars due; and


e) an estimation of the amounts of US Dollars required from GNPC for the


following month.


5.2 Not later than the twenty-fifth day of each Month, Contractor will furnish GNPC a


statement reflecting for the previous Month:


a) payments;


b) the nature of such payments by appropriate classifications; and


c) the balance due to or from GNPC.


5.3 Contractor may in the case where a large unforeseen expenditure becomes necessary


issue a special Cash Call Statement requiring GNPC to meet such Cash .Call within


ten (10) days of receipt of such Statement. / A _Yvn









































_0944v2_


Petroleum Agreement, MOE/GNPC/Vltol * Annexes


 SECTION 6





6.0 PRODUCTION STATEMENT


6.1 Subsequent to the Date of Commencement of Commercial Production from the


Contract Area, Contractor shall submit a monthly production statement to GNPC


showing the following information for each Development and Production Area as


appropriate:


a) the quantity of Crude Oil produced and saved;


b) the quantity of Natural Gas produced and saved;


c) the quantities of Petroleum used for the purpose of conducting drilling and


Production Operations, pumping to field storage and reinjections;


d) the quantities of Natural Gas flared;


e) the size of Petroleum stocks held at the beginning of the Month;


f) the size of Petroleum stocks held at the end of the Month.


6.2 The Production Statement of each Calendar Month shall be





later titan ten (10) days after the end of such Month.
























































0944v2.


Petroleum Agreement. MOE/GNPC/Vitol - Annexes


 SECTION 7








7.0 VALUE OF PRODUCTION STATEMENT


7.1 Contractor shall prepare a statement providing calculations of the value of Crude Oil





produced and saved during each Quarter based on the Market Price established under


Article 11 of the Agreement as well as the amounts of Crude Oil allocated to each of


the Parties during that Quarter. Such Statement shall be submitted to the Minister and


to GNPC not later than thirty (30) days following the determination, notification and


acceptance of the Market Price to GNPC according to Article 11 of














































































































0944v2. 19


Petroleum Agreement, MOE/GNPCA/itol - Annexes


 SECTION 8





8.0 COST STATEMENT


8.1 Contractor shall prepare with respect to each Quarter, a Cost Statement containing the


following information:


a) total Petroleum Costs in previous Quarters, if any;


b) Petroleum Costs for the Quarter in question;


c) total Petroleum Costs as of the end of die Quarter in question (subsection 8.1


(a) plus subsection 8.1 (b);


d) Petroleum Costs for Development Operations advanced in the Quarter in


respect of GNPC’s participating interest pursuant to Article 2.8 of the


Agreement;


e) Costs as specified in (d) above which have been recovered during the Quarter


pursuant to Article 10.2 (e) of the Agreement and the balance, if any, of such


costs unrecovered and carried forward for recovery in a later period.


Petroleum Costs for Exploration, Development and Production Operations as detailed


above shall be separately identified for each Development and Production Area


Petroleum Costs for Exploration Operations not directly attributable to a specific


Development Area shall be shown separately.


8.2 The Cost Statement of each Quarter shall be submitted to GNPC


(30) days after the end of such Quarter.









































_0944v2_


Petroleum Agreement, MOE'GNPC/Vitol - Annexes


 SECTION 9








9.0 STATEMENT OF EXPENDITURES AND RECEIPTS


9.1 Subsequent to the Date of Commencement of Commercial Production from the


Contract Area, Contractor shall prepare with respect to each Quarter a Statement of


Expenditures and Receipts. The Statement will distinguish between Exploration


Expenditure and Development Expenditure and Production Expenditure and will


identify major items of expenditure within these categories. The statement will show


the following:


a) actual expenditures and receipts for the Quarter in question;





b) cumulative expenditure and receipts for the budget year in question;


c) latest forecast of cumulative expenditures at the year end; and





d) variations between budget forecast and latest forecast and explanations


therefor.





9.2 The Statement of Expenditures and Receipts of each Calendar Quarter shall be


submitted to GNPC not later than thirty' (30) days after the end of such Quarter for


provisional approval by GNPC.



























































0944v2. 21


ur\cmktor/\/iinl • Annexes


 SECTION 10








10.0 FINAL END-OF-YEAR STATEMENT





10.1 The Contractor will prepare a Final End-of-Year Statement. The Statement will contain


information as provided in the Production Statement, Value of Production Statements,


Cost Statement and Statements of Expenditures and Receipts, as appropriate. The final


end-of-year Statement of each Calendar Year shall be submitted to GNPC within ninety


(90) days of the end of such Calendar Year. Any necessary subsequent adjustments


shall be reported promptly to GNPC.














































































































_0944v2___


Petroleum Agreement. MOE/GNPCA/itol ■ Annexes


 SECTION 11








11.0 BUDGET STATEMENT


11.1 The Contractor shall prepare an annual budget statement. This will distinguish


between Exploration Expenditure. Development Expenditure and Production


Expenditure and will show the following:


a) forecast expenditures and receipts for the budget year under the Agreement;


b) cumulative expenditures and receipts to the end of said budget year; and


c) the most important individual items of Exploration. Development and


Production Expenditures for said budget year.


11.1.1 The budget may include a budget line or lines for unforeseen expenditures


which, however, shall not exceed ten percent (10%) of the total budgetary


expenditure.


11.2 The Budget Statement shall be submitted to GNPC and JMC with respect to each


budget year no less than ninety (90) days before the start of such year except in the


case of the first year of the Agreement when the Budget Statement shall be submitted


within sixty (60) days of the Effective Date.


11.3 Where Contractor foresees that during the budget period expenditures have to be


made in excess of the ten percent (10%) pursuant to Section 11.1.1 hereof, Contractor


shall submit a revision of the budget to GNPC. J m rtn


















































_0944v2_


Petroleum Agreement, MO&'GNPCA/itol - Annexes


 SECTION 12








12.0 LONG RANGE PLAN AND FORECAST


12.1 Contractor shall prepare and submit to GNPC the following:


a) During Exploration Period, an Exploration Plan for each year commencing as


of the Effective Date which shall contain the following information:


i) Estimated Exploration Costs showing outlays for each of the years or the


number of years agreed and covered by the plan;


ii) details of seismic operations for each such year;


iii) details of drilling activities planned for each such year; and


iv) details of infrastructure utilisation and requirements.


The Exploration Plan shall be revised on each anniversary of the Effective


Date. Contractor shall prepare and submit to GNPC the first Exploration Plan


for the Initial Exploration Period of two (2) years within sixty (60) days of the


Effective Date and thereafter shall prepare and submit to GNPC no later than


forty five (45) days before each anniversary of the Effective Date a revised


Exploration Plan.


b) In the event of a Development Plan being approved, the Contractor shall


prepare a Development Forecast for each calendar year of the Development


Period, which shall contain the following information:


i) forecast of capital expenditure portions of Development and Production


expenditures for each Calendar Year of the Development Period;


ii) forecast of operating costs for each Calendar Year;


iii) forecast of Petroleum production for each Calendar year;


iv) forecast of number and types of personnel employed in the Petroleum


Operations in the Republic of Ghana;


v) description of proposed Petroleum marketing arrangements;


vi) description of main technologies employed; and


vii) description of the working relationship of Contractorto GNPC.








0944v2


Petroleum Agreement. MOE/GNPC/Vitol • Annexes


c) The Development forecast shall be revised at the beginning of each Calendar


Year commencing as of the second year of the first Development forecast


Contractor shall prepare and submit to GNPC the first Development forecast


within one hundred and twenty (120) days of the date when the first


Development Plan is approved by the Minister and Contractor commences the





implementation of such plan and thereafter shall prepare and submit a revised


Development Forecast to GNPC no later than forty five (45) days before each


Calendar Year commencing as of the second year of the first Development


forecast.


12.2 CHANGES OF PLAN AND FORECAST








It is recognised by Contractor and GNPC that the details of the Exploration Plan and


Development forecast may require changes in the light of existing circumstances and


nothing herein contained shall limit the flexibility to make such changes. Consistent


with the foregoing the said Plan and Forecast may be revised annual

















































































































_0944v2_ 25


Petroleum Agreement, MOE/GNPC/Vitol ■ Annexes